7 Ways to Convince Investors to Back Your Idea

Written by Elena Tahora

The current economic climate is ripe for starting a business and entrepreneurs are two a penny. However, there is a wide margin between a great idea and a successful business, and in most cases, you will need funding to bridge the gap. Unfortunately, attracting business funding is not always a piece of cake, even when you have a brilliant idea. Here are seven tips to maximise your chances of persuading investors your idea has legs.

Have a Feasible Idea

The world is full of people with ideas, but not all of them stand up to scrutiny. To attract investment, you need a great idea. You don’t necessarily need to come up with a truly original idea, but your idea does need to have potential. Perhaps you have spotted a gap in the market or you have thought of a new and innovative way to do something. Whatever your idea, think it through and examine it from all angles before you put it on the table for investors.

Speak to family and friends. If your idea doesn’t persuade them, it isn’t likely to set the world on fire when you go looking for investment funds.

Make a Creative Pitch

Experienced investors have heard it all before. To attract their attention, your pitch needs to be creative. This applies whether you make a pitch in person or you go looking for investors on a crowdfunding website.

You only have a short amount of time to attract attention, so make it count. Keep your pitch short and to the point. Watch old episodes of Dragon’s Den to find out what not to do. Investors are busy people. Be confident and persuade them your business idea is the perfect investment vehicle.

Write a Smart Executive Summary

Most investors don’t have time to sit and read through hundreds of pages of detailed financial analysis. You need to grab their attention from page one, so write a smart executive summary that outlines your idea, what you hope to achieve, and how their investment will help you succeed.

Leave them wanting to know more. This is your chance to make a good impression.

Think Lean

Investors are unlikely to be persuaded by your business idea if they suspect you are going to fritter their money away on an expensive office and business class flights. It is a universally acknowledged truth that you must spend money to make money, but until the business is established, think “lean”.

Cash flow can make or break a fledgling business, so show investors you know how to keep expenditure to a minimum. The lower your costs are, the more money there is available to reinvest in the business.

Market Research

You must know your target market before you make a pitch for investment. Carry out market research to make sure there is a gap in the market for your product or service. Find out who your target customer is and have your facts and figures ready.

For example, if you want to convert a large period property into student flats, speak to local real estate agents to find out whether the local property market can sustain more student flats. You may discover you are looking in the wrong area.

Make Sure the Figures Add Up

Potential investors will not be impressed if your figures don’t add up. Don’t ask for more money than you need and account for every penny you are asking for. Investors are often rich, but like many rich people, they are frugal with their money.

Provide details of how you intend to spend your investment funds. Check and double-check your figures and make sure you know them inside and out, as you will be grilled on the details.

It is important that you show investors you are financially astute. If you lack experience in this area, be prepared to learn.

Demonstrate Experience

You don’t necessarily need previous experience to start a business, but it helps. Many investors will be reluctant to hand over cash to someone who has no business experience. If you lack relevant experience, consider forming a partnership with someone who does. A co-founder with previous business management experience could be the missing ingredient you need to attract funding for your embryonic business.

Don’t be disappointed if your first pitch falls flat. Pick yourself back up and look at where you went wrong. Next time, you will be better prepared.