Aksvini Kamaran of imoney.sg talks about attracting the right investor at the right stage of a startup, and the best approach to do that
There’s no asset more important than time in the realm of business. Unfortunately, it’s not cyclic in nature like money is and does not wait for you to catch up to it if you have taken it for granted. When it comes to raising capital for your business with the help of investors, time is far too precious to be wasted on chasing wrong investors at the wrong time.
Each investor has their own field of expertise they’re comfortable with and a certain investment route they prefer to abide by. Hence, it literally pays to do a thorough analysis of the investor you are targeting for getting your startup funded.
What makes a business attractive to investors
The key to putting yourself in the good books of the potential investors is to shift your perspective by first putting yourself in their shoes understanding how they will perceive the maturity stage of your startup. For instance, any entrepreneur who has achieved the following targets for his business model will surely be able to position himself in the speed-dial of a host of investors:
- A well-tested product
- A strong niche market
- Ease in scaling up
- Scope for high profitability
The maturity of your startup’s growth stage is the most vital determinant of the right investor for your business. Different investors have different capitalisation strategies and a distinct preference for the businesses they choose to fund. For instance, VCs generally make multi-million to billion dollar investments in mature businesses; whereas, angel investors are more open to smaller, low-tier businesses.
So what is the best approach to attract investors then? The answer is simple – networking.
Networking is truly the dark horse of entrepreneurial skills that allows you to reap far more benefits for the work you have put in. By engaging in regular interactions and sending out teasers to the community of investors and fellow entrepreneurs, you may just sow the seeds for magnificent business collaborations down the line.
Cold calling rarely succeeds in grabbing the attention of investors since they are more accustomed to dealing with entrepreneurs that have a strong reputation in their industry, or have a reliable reference to bank on. Hence, the onus of kickstarting this essential trust-building exercise is completely on you if you ever hope to get their financial umbrella over you.
Picking the right investor for the right stage
1. The idea stage — No matter how ingenious you consider your business “Eureka!” moment to be, no professional investor will risk sticking their neck out for you when you have no tools handy to run your business. It’s when the existence of your business can only be justified by the vision in your mind and you have no product, no plan, and no success record in your field of business.
If your business has still not transcended this stage, do not make the mistake of approaching any professional investor as your business has no tangible value whatsoever for anyone to assess.
2. The working prototype — Referred to as the seed stage, it is when you have finished building an early prototype of your conceptualised product and now require some financial assistance in building a market for the official product.
In this case, seeking out industry partnerships and government grants may be a good place to start for gaining early investments. However, if your industry credentials and your product’s potential are extremely promising, then you may succeed in earning the financial favour of angel investors and secure an investment worth $250,000-$1 million.
3. The early adoption — In this stage, entrepreneurs officially kickstart the implementation of their short-term expansion plan by pitching to investors for securing funds for initiating the product manufacturing process, hiring talent to manage operations, and for marketing the business.
It’s safe to say that a majority of early-stage VCs and angel investors will be open to lending their ears to your pitch and their funds to your business if they see good growth potential.
4. Scaling up — Popularly known as the growth stage in investor circles, this is the sweet spot that every investor wants to make their mark on.
As soon as you have succeeded in netting the first $1 million in revenue for your business, VCs will be fawning over your company to help play a part in seeing through all growth stage rounds of investment, from round A to G. These investments are generally worth over $5 million.
5. Moving on — Known as the exit stage, this is the culmination of every entrepreneur-investor relationship that symbolises the arrival of the next great frontier for a successful business. It is when VCs and angel investors sell their stake to new players like PE, investment bankers, or competitors. Entrepreneurs and early investors can also choose to take the company public to raise more funds by offering an IPO.
The author is Country Manager (Singapore) of imoney.sg
The views expressed here are of the author, and e27 may not necessarily subscribe to them
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