As a business owner, founder, or CEO, you are always looking to take your organization to greater heights. This can be in the form of reaching out to new markets, diversifying your product portfolio, ramping up existing production facilities, and more.
This means that securing that additional capital or financing can be very important. It can allow you the perfect stepping stone to either fund sustenance or expand the existing business operations. Given how dynamic the business ecosystem has become in recent years, entrepreneurs are always looking for ways and means to make their businesses investible.
This is particularly true of start-ups that are always looking for supportive Venture Capital (VC) firms. In this resource article, look to cover some important topics to help make your business investible. If you are a start-up entrepreneur looking to address this issue, you might be interested in what we have to say.
5 Important Factors Investors Look For Before Investing In A Business In this section, we are going to explore five important factors that attract potential investors and VC firms when they are scouting for investment opportunities.
The Right Professionals at the Helm- Many leading VC firms and financial experts point out that investors invest in the right people and not the company. While this may be a far-fetched assumption, the underlying belief is easy to see. A dynamic CEO or a great team of vertical heads can be reason enough for investors to repose faith in your business. Great people have good ideas and demonstrate solid performance.
An Air-Tight Business Model to Scale Operations- One of the first things potential investors are likely to look for is what do you plan to do with all your money. This means that you need to have a rock-solid business plan. Make sure to take into account even the smallest variable when you are creating the plan. If you can convince them rationally and logically, they will get on board to fund your business.
Strong Financial Foundations and Business History- Right from the start, you need to ensure that your financial books and balance sheets are crystal clear. You do not need to worry about being conservative. In fact, VC firms look for start-ups that are conservative in terms of their cash flows and money spending abilities. Debt obligations, particularly, bad credit can harm your prospect of raising capital.
Convincing Presentations and a Beautiful Narrative- There is a reason why some entrepreneurs can generate those huge funding rounds while some cannot. Presentations and Pitches are integral when it comes to raising funds for your business. How you can present the business plans, models and projections play a critical role in the minds of the investors. If you come across as confident, they are willing to invest.
Uniqueness and Innovation helps you get attention- Let us face it. With so many start-ups coming up left, right, and center, uniqueness is rare. However, there is no doubt that when VCs hear words like ‘unique’ and ‘innovative’, they are likely to look up and take notice. Make sure that you spell out what makes your business stand out. It can be in the form of addressing a new concern or providing infinite value.
Which Businesses Are Mostly Struggling With Investments And Financing? Some enterprising start-ups with strong business models and promising entrepreneurs never seem to have any problem when generating investments. However, when it comes to business financing, not everyone seems to be enjoying it.
In this section, we are going to look at some business types and problems that are struggling with investments and financing.
Businesses affected by the COVID-19 Pandemic- The pandemic created a lot of economic hardships for SMEs and MSMEs in different sectors. Their cash flows were adversely affected and traditional lenders became hesitant in extending financial help.
Businesses that have poor credit scores- There can be multiple reasons why a business can suffer from poor credit scores and ratings. Failure to pay loans can lead to the accumulation of bad credit business. This keeps investors away.
Lack of digital transformation- Investors and VC firms are not too confident of businesses that have failed to transition to digital platforms and technologies. The pandemic has proven that digital technologies are critical to sustenance and growth.
Poor Leadership and high attrition rates- When VCs look at firms to invest in they are strongly guided by the company culture. This means looking at everything from who is in control to assessing the attrition rates in an organization. This plays a major role.
Businesses that do not have assets as safety- No investor wants to jump blindly with their cash. They will always look for some form of collateral or safety. If your business has movable and immovable assets, it will give them the confidence to invest safely.
Top 5 Tips To Help You Make Your Existing Business Investable In the final section of the article, we are going to offer five tips that can help your business become attractive to investors.
Firstly, businesses need to start working on their financial debts and liabilities. Make sure that you can clear your books through aggressive cost-cutting strategies. No VC firm is likely to take on an early-stage start-up with huge liabilities.
Secondly, investors are willing to invest when they see that the business is making some small profit. This is always an encouraging sign to investors and points to growth. The credit needs to be ahead of the debit during the investor talks.
Thirdly, building a successful, professional, and experienced team can be a motivating factor for VC firms. Attract the right talent and set them up as heads of the verticals. VC firms like good people leading important operations in a business organization.
Fourthly, businesses should always have a clear plan of investment. Do not try to confuse the VC firms with what they are going to get. Ambiguities will spell doom for your business. also, you need to have a realistic assessment of your company.
Lastly, businesses need to be truthful and realistic about their goals. There is no point lying on your plans, models, and financial records. If you are lying on any of the company documents, you will not only get a bad rep but also invite legal troubles.
The Bottom Line While the start-up ecosystem is thriving, raising capital is not as easy as it sounds. Investors will weigh every possible option there is before they hand over their cheques to your business. By following the above-mentioned points, you will be in a better position to make your business investible. If you would like us to assist you in any shape, way, or form, please do not hesitate to reach out to us in the comments below.
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