For entrepreneurs and small business owners, there’s no better time to secure funding for your startup. Thanks in part to Congress passing the JOBS (Jumpstart Our Business Startups) Act in 2012, many startups and investors are working together to achieve greater financial goals. As a result of the new legislation, startups can use a variety of methods, including crowdfunding, to find the right investors. But as private investors have a greater reach into the culture of startups, they have become increasingly careful.
Entrepreneurs and small business owners who are looking for startup capital need to understand what private investors look for. Cover these 5 basics and you may just watch the capital roll in.
1. Need and Value Proposition
All entrepreneurs and small business owners should be able to look at the market from the perspective of a consumer. Your product or service should address a need. If not, it’s unlikely to attract the attention of private investors.
In this case, we mean the direction your startup is heading. Are you gaining momentum and demonstrating growth? Too many businesses confuse growth with the bottom line. Are you building management team? Developing a brand personality? You need to be able to demonstrate to private investors that given your stage of evolution, you are headed in the right direction, and a direction that is well planned.
3. Private Investors Respect Team
You are a company developing a startup for the market. But does your team have the experience, skills, or expertise to succeed? Your team is just as important as your product or service. For startups, the personality of their brand and the professional potential of their goods and services is represented by the management team. Make sure yours is in good order before collecting larger investors.
One of the hardest parts of getting a startup off the the ground is attracting those initial investors. This is one way crowdfunding has changed the game. It does this by allowing cash infusions from smaller investors to attract larger investors. Your investors will want to understand your money management and cash flow. Make sure your management team or ancillary services includes business accounting and granular reports. What investor wants to bring cash to the table if they aren’t certain it will benefit the business?
Investors are going to want to understand your relationship to the market as a whole. Some of this might include the positioning of your competition. What is the possible market share you can capture? If the economic landscape doesn’t demonstrate room for your product or services, investors are likely to stay away. Your value proposition should include the need you fulfill. It should also include the potential market share you can own with an infusion of capital.
Find The Best Startups
Wondering what the innovators are up to? Studying the success stories of entrepreneurs in similar situations, like Michael Krasman of UrbanBound may help you chart your course. One thing is certain: there are startups succeeding every day in this economy. You can learn from what they do right, as well as the moves they regret. And it’s easy to find the latest innovative startups and learn what they are up to.
Check out our database of recent innovative startups to learn more about the best new companies.