Unless you're fortunate enough to be able to fund a startup on your own, you are going to have to seek investors to help get your business up and running. The problem is if you fail at your pitch, you can forget about securing that much-needed money.
To help ensure you impress potential investors, here are seven questions you must be prepared to answer--and answer well.
1. Are These Numbers For Real?
Whether you're talking to investors, or even reviewing data, the first question that will likely be asked is "What are sales?" And, you're going to have to show more than just an actual dollar amount.
Investors will want to know where your sales are coming from, how they're driven, the role of marketing, and the partners you have involved. Furthermore, you need to show whether or not these numbers will increase or decrease. Remember, investors want to invest in a company that not only has impressive sales figures, but also will make a profit.
2. What's Your Competitive Advantage?
What makes your product and and business stand out from the competition? Is it faster? Is it cheaper? Do you offer free shipping? Do you engage with your customers?
As Dr. Jonathan Kaplan from medical tech startup BuildMyBod states, "It's not good enough to tell your customers how awesome you are... you have to show them and prove to them why you're better than your competition over and over."
3. What Do You Bring To the Table?
If you've watched Shark Tank, then you've probably witnessed the investors base their decision not so much on a business idea, "but in the entrepreneur themselves."
When you're asked, "What do you bring to the table?" you have to provide investors with evidence of previous success. Have you founded a startup before? Did you launch a successful Kickstarter campaign? Always be ready, and willing, to highlight your achievements.
4. How Do You Define Your Market?
When you came up with your business idea, you most likely had an idea of who you would be selling it to. For example, if you were the MIT students who developed a 'Sesame Ring' to replace Boston transit cards, you obviously didn't have ranchers in Texas in mind.
Investors need to know who you're selling your product to. What problem does it solve for them? Would they purchase the product? Marketing Donut has put together a helpful six-step guide that can help you define your market. It's worth reviewing before you have to face investors.
5. What Are The Risks?
Investing in a startup is a risky business. That's why you need to inform investors of the possible risk sinvolved in investing in your startup. This not only establishes trust between you and potential investors, it proves that you know your business and market.
To minimize risks, and put investors minds to ease, answer the following questions:
6. Why Me?
Choosing the right investor is one of the most important decisions that an entrepreneur will have to make. Simply presenting your idea to a potential investor because they have the money to fund your startup doesn't mean that success is guaranteed.
That's why investors want to know why you selected them in the first place. CNET interviewed five entrepreneurs to find out the best ways to select the right investor for your startup. It was suggested that you find investors who can trust, who can help solve your current problems, who you can connect with, are diverse, and have similar interests.
7. What's Your Exit Strategy?
Investors need to know how they'll get their money back in case the startup fails, or even takes off. In other words, how are you going to "cash out" the business?
Business Insider shares some of the most common exit strategies, which include: