Seven tips for startups before going to investors

Turning an idea into a viable business is one of the most difficult endeavors a person can undertake. Giving life to an idea is like giving birth to a child, and raising it to be a full-grown adult capable of standing on his own feet. While the first thing that startup entrepreneurs think about is how to fund their bright idea, going too soon to investors may fire back and lead to rejection and frustration.  

Thus for your unique path to success to be realized, you need to go through some steps first before even thinking of approaching an investor. Unless you test, develop and validate your idea first, how do you expect to sell it to others? 

Here are some tips to help you before seeking funds

  1. Research the market and find out which problem your idea solves

Every business whether it’s a startup or a large company must address a certain problem for customers or fills in a certain gap in the market. You might come up with the brightest idea to find out later that someone has preceded you and has already addressed the same problem without much success. If others have tried and failed, it’s important to learn why.  Market research will enable you to estimate the size of your market and whether or not you can get profit out of your idea.

  1. Know your competition

Observe your competition on a large scale and learn from their mistakes. Read about all the inspirational and success stories of other entrepreneurs in your line of business. This is a pivotal step in objectively evaluating your idea and can give you valuable insight on how to position yourself in the market

  1. Identify your target audience

Know your target consumer’s personality and behavior. First,  identify your market segment with respect to age, gender, location, and profession. Second,  analyze your customer’s preferences and choices over time. You can use social media to gather such data and get the help of a business expert to help you generate a profile for your customers. This kind of analysis helps you work towards a critical milestone of product-market fit. This means that the product you built matches the needs of the market you are trying to serve and this is a critical marker to showcase to your investors. 

  1. Find your support 

No venture capital would want to invest in a one-man show kind of business. Having business partners together with a talented team is a great resource for support, and valuable advice and gives investors the impression that you have something good to offer. 

Demonstrate to your investors that your teammates are passionate partners who will help you achieve your long-term business goals. Investors are always looking for value and long-term sustainable solutions to business problems. 

  1. Create your business  plan 

Most investors will require some sort of a business plan in order to decide if your idea is worthwhile. A business plan is a sort of manifesto for you to guide you at least for a period of five years. It  usually contains some kind of an executive summary of the  project’s idea, a market analysis, detailed steps of execution, team information, expected outcome (product or service), success indicators s, and a financial estimate/plan

  1. Execute and show some traction:

When approaching investors there is nothing better than the real thing. Investors do not want to see concepts. Start building, build fast, release to the market, learn from your customers, and iterate. Nothing beats real execution and traction. So the best time to go to investors is when you have some sort of a viable product with enough traction to show them that you have potential and that you have already created a demand for your product or service.

  1. Determine your source of capital 

 Now is the right time to identify the right investors for your business. Find investors who have experience in your line of work, who are passionate about your business, and who are the right fit in terms of size and stage. 

Startups, don’t need to go to big venture capitals. Instead,  they need a seed-stage investor who can put a bank check of 250K to 1 million dollars. Finding the right investor for your business is critical to extracting the most amount of value and giving your business the best chance it has to grow and succeed.

Summing it up

If your startup succeeds then you have done something right that 90 percent of new businesses fail to do. Investment is only one variable in a long equation. After all it’s your idea, your passion, and your dream. So get the basics right and follow through with a plan and execute it well. If you follow the above steps, it’s highly unlikely that you will be turned down by investors, as many venture capitals would like to see the vision, fast execution, persistence, wisdom, and resilience coming along with a brilliant idea.