5 Excellent Tips Every Startup Should Follow To Lure Investors

One of the most difficult things about being part of a startup is convincing others your idea is different — and better than — other competing businesses.

Securing healthy rounds of funding from high-profile investors gives you some comfort room to explore ideas and refine your product.

The problem, however, is that it can be hard to convince an investor that your business is worth their money and time.

We spoke with Salim Teja, managing director of information and communications technology at MaRS, a Toronto-based innovation center that helps startups and entrepreneurs succeed. Teja, who also works with MaRS’ JOLT startup accelerator, told us exactly what investors look for in an entrepreneur.

Here are a few things to consider before, during, and after your next big investor meeting.

Make sure you know your market inside and out.

Don’t let your passion for your product cloud your judgment. Always consider whether there’s a big enough market for what you’re trying to build. Even if the idea is creative and smart, it needs to be massively marketable.

“Very often, we see that disconnect where investors struggle because they might like what the product is,” Teja said. “But the market is too small and they can’t see it as a high growth opportunity.”

Know your company’s story, and tell it well.

Teja emphasised the importance of storytelling when it comes to attracting investors. Not only do you need to be able to describe what problem your product is solving and how it works, but you also need to communicate why your company is the right team to do it. A lot of entrepreneurs struggle with communicating their story clearly, according to Teja.

“Many of our entrepreneurs can’t tell that story succinctly or clearly to an investor,” he said. “And very often investors have to piece together the story or they walk away confused. You have to be able to tell them a really clear story that gets them excited.”

Remember that execution is key.

Even if your startup’s idea is innovative and has a giant market, investors need to be convinced that you’re company is the best at its job. Showing investors that you’re actually capable of building a business is extremely important, Teja said.

This means having solid milestones to show for the work you’ve done — such as traffic to your website, a solid user base, etc. It’s crucial to decide what your startup’s most valuable milestone will be early on in the business development process.

“I think the bar has become quite high in terms of what investors are expecting versus 5 or 10 years ago,” he said. “[Back then] it would have been good enough to have a great idea. So prove that you can out-execute everybody else.”

Lead the conversation.

When you’re meeting with an investor, don’t be afraid to take control of the conversation within reason. Investors want to see that you’re confident and excited about your business.

“They will try to figure out if that person is a doer,” Teja said. “First impressions are done in the first 5 or 10 minutes of the conversation. If an entrepreneur is coming to a meeting and they don’t look confident, they’re not making eye contact, and they’re not leading the conversation, those are bad signals.”

But don’t be confrontational, and listen carefully.

Investors want to know that you’ll be a team player and you’ll be willing to work with them on new ideas. Another common problem among some entrepreneurs is being too confrontational rather than listening during meetings.

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