The Art of Luring Investors to Invest in Your Startup

The Art of Luring Investors to Invest in Your Startup

Before starting any start-up or business, it is pertinent to have and raise sufficient capital. And when the question of raising the capital arises, the role of investors comes into the picture and proves to be very crucial as well as important. They not only generate the capital but are also considered as the backbone of the entrepreneur. While they can be good advisors for managing the funds, they also aim at the long-term benefits of the start-up. They strive to create and shape the goodwill which would attract more investors in the future. Therefore, having good investor relations is the key to future funding.  

Moreover,no matter how fruitful your start-up idea is or how well you can execute it or how well it has flourished, capital and financial support will always be a necessity inevitably.

However, there are degrees of risks involved in investing in a start-up such as returns risk, returns delay, etc.Thus, not many investors would agree easily to invest in a start-up. That is why luring investors to invest isconsidered art only a few can master. Even the extraordinary start-up candidates find it difficult to convince investors. 

Luring investors to invest

While finding potential investors to invest in your start-up is essential, it is difficult to convince them. Not many are aware of the methods to attract potential investors towards their start-ups. However, with efficient research and reach, one can master this art of luring investors towards their start-up. There are several popular and proven suggestions as well as tips that may help a founder to persuade the investors. 

1. Long-term planning

It is necessaryto have a definite direction in a start-up. This not only shapes the future of the start-up but also decides its present. A person having a long-term plan as to where he sees his product or service, will attract potential investors easily. Founders need to understand that investors are risking their money in the start-up and thus, would be expecting something in return. No investor would like to invest their money in astart-up where the founder himself is clueless about the next phase of the start-up. While it is not possible to be certain about every situation, a well-planned beginning with long term goals willassure the investors that their investment will not go in vain and will give something in return. 

2. Set a financial goal

Setting reasonable financial goals is part of long-term planning. It is also one of the keys to a successful start-up. A person having a predetermined estimate of finances and expenses will not only attract potential investors but will also stand in a better position than the rest. Having a precise financial demand, helps the person to determine how much financial assistance the start-up requires. Moreover, it helps in identifying the type of investors suitable for the start-up. 

3. Solid Market Research

Solid market research has become one of the crucial factors which will determine where the start-up will be in the future. It is necessary these days because of the competition. The founders need to understand that they will attract more investors if their product or service is resolving or trying to easethe significant issue. Investors like realistic solutions. And thus, a person with no or little market research will struggle not only in attracting investors but also in surviving in the market. 

4. Types of investors 

One important way to lure investors is to identifythe investment options suitable for the start-up. The most common types ofinvestors are Angel investors, Personal investors, Banks, Venture Capitalists and Peer-to-peer lenders. A founder needs to find out which type of investors would beappropriate for the start-up. Once the type has been determined, it becomes easy to approach the investors.  

5. Fundraising platforms

Online fundraising platforms can be really helpful in getting your start-up noticed. Since the platform is virtual, the location of the start-up cannot be a limiting factor. In the past few years many online fundraising platforms have gain popularity among entrepreneurs such as AngelList, Seed Invest, We Funder etc. Moreover, there are also platforms for donations such as Kickstarter and Indiegogo. Even if the founders do not want to raise all of the money through these platforms, they can get their start-up noticed on these platforms, which further may open doors for other opportunities.

6. Role of co-founders

Starting a campaign on your own can be very difficult. Most of the successful start-ups would not be successful if they did not have co-founders.Having co-founders whocan support the start-up as well as promote smooth execution can be a boost for the start-up. It needs to be understood that, when investors approach a particular founder, they not only see the product or idea but also the people behind it. And in these circumstances, co-founders act as the backbone of the start-up. Moreover, sometimes you may need the perspective of another person to execute your ideas.Therefore, having the right people by your side and the ones you can rely on, can be a boost for the start-up. 

7. Incubators/ Accelerators

Start-up incubators or accelerators are the companies that help the new start-up campaigns to settle as well as develop. They provide training and consultancy. Though this does not guarantee the success rate, it does improve the probability of attracting potential investors and getting noticed in the market. There are various national as well as foreign incubator companies that may provide assistance from the inception. 

8. Networking and connecting

Networking plays a very important role to make your start-up plan reach to a large number of people. It not only connects with small business owners who may serve as mentors and offer moral support, but also in finding prospective customers. Networking helps you get involved in your industry which in turn will attract attention to your start-up. 

9. Advertisements 

Advertising your product or service on platforms like social media is one of the most cost effective as well as powerful methods. It will make your product or service easily discoverable to others. Moreover, with the help of advertisements, you can ask for collaborations and sponsorship. This will not only attract potential investors but also prospective customers. 

10. Visibility 

The main challenge for any start-up candidate is to get noticed by the ‘right’ investors. It is all about visibility. And one of the most effective ways to get noticed is by organizing and participating in the events. It may be by meeting active investors, getting involvedin industry trade shows and networking functions, participating and engaging in coding marathons, etc.
Moreover, blogging can also help to get attention fromthe investors you know. While it is a very underestimated method, it can attract inbound attention. There are many websites on which investors can be found very active, especially during thesedays of the pandemic. 

11. Direct contact

Simply contacting the investors through Emails, social media accounts such as LinkedIn, Twitter, Facebook, Instagram etc., may prove to be beneficial in some cases. Therefore, the founders should not eliminate this option and try contacting the investors directly. Moreover, it will be more helpful if their Emails and requests are supported by references and recommendations from their mutual contacts. 

12. Follow up and follow-through

It is always fruitful to keep your potential investors updated about the current status of your start-up as well as what you are planning in the next phase. You can send follow-through mails to keep them updated. 
Your mails or messages may go unnoticed by the investors. In that case, you can always send another follow-up Email or message, if you do not get a response within a reasonable period of time. However, make sure that you do not bombard their inbox by mails and messages. 

13. Seek advice

No matter how successful your start-up is, there is always some scope for improvement. Therefore, it is important to ask for advice. You should always ask for advices and suggestions from various big shot investors. It not only will help in improving their campaign, but will also build and strengthen the relationship with the investor and the candidate. There is a high probability that these people may turn into potential investors at some point. 
Luring investors to invest can be a tough job if someone is new in the market. However, with some research and quality networking, founders can attract investors towards their start-up in no time. Apart from all the ways mentioned above, you must also work on the proposal. The quality presentation of the proposal plays a major role in convincing investors. It is favourable to explain how youare planning to utilize the resources provided by the investors, not only in the present but also in the next stage of the campaign. This will leave a magnificent impression and may increase the chances of the investors to say yes. 


References :- 

1. Alejandro Cremades, The Art of Start-up Fundraising (Wiley 2016), accessed date- July 28, 2020
2. Murray Newlands, 10 ways to find investors for your startupstart-up,, accessed date- July 29, 2020