30 April 2016

6 Keys to convince your first investor


This is one of the main obsessions of many entrepreneurs, how to convince a first inverter and having adequate capital to grow the business in question apace. Having talked to many entrepreneurs, investors, venture capital funds and accelerators are some common points to take into account. But before getting down there are certain premises to note:

– For the investor, present what they present, you are a possible investment that want to get the maximum benefit. It’s your money; they can destine to government bonds, initial public offering or buy shares in your startup. Concepts like “change the world” or “improve the lives of people” does not enter his vocabulary. Always remember this: profitability.

– Avoid some common errors “newbie” you have them summarized

6 Keys to convince your first investor6 keys to convince your first investor

Seen all this, let’s look at what investors really want to hear:

1- Consistency with the historical investment: the vast majority of investors have a predilection for some thematic startups or entrepreneurs. Sometimes a “venture capital” does not invest in travel, or an investor specializes in ecommerce. Collect such information before you’ll avoid anything productive visits to your goals centered attracts investment.

2 Total commitments: investors want to see that you are 100% for this project, no half measures. Not very logical to think that you’re still groping to see that this business works and ask someone to invest money. This almost never usually works. Make sure you can prove that no personal doubts in your approach.

3- Heterogeneous and motivated team: to put a clear example: have you ever seen a football team where everyone wants to play forward and score goals?, Because this is not very different. You need to cover most important areas: technical, product, marketing, financial part … When you can present to a team with complementary skills and oriented the same cause have much livestock.

4- Scalability: scalable business is one that does not need to bend their resources to get double benefits. Once the investment in the basic structure of the business itself, income can rise exponentially. The investor needs to see scalability because it is the essential element for a good return.

5- Metric: This is the point where most entrepreneurs fail. It is based primarily on numerically to demonstrate the good performance of the business. If you can not teach validated figures, although they are a test market, you’ll have difficult to convince an investor. Everything else will see it as subjective arguments. And behind this will enter the logical doubts: the market is not big enough, customers do not respond…

6- Power “protect” their investment: here comes into play the following terminology: (these are just some)

– Premoney Rating: valuation of the company before investing.

– Preferred Dividend: in case of profit, the first charge is the investor (provided this is clear firm).

– Preference in the settlement: in case of sale, the initial investment is first settled, and then partitioned by parties according to the% agreed.

– Emption: If a partner sells shares, investors have the option of first refusal.

– Anti – dilution Clause: If there is another round of financing and valuation is lower than in the 1st, the investor retains its% in the company.

As you can see, there are certain aspects that the investor and the entrepreneur have different paths. Many entrepreneurs at the beginning cede too because they need money and are conditioned and shackled in a not so distant future.

What are the key elements for you to convince an investor?