You have developed great technology and founded a very promising company. You are currently looking for private investment to support your operations to become a game-changer and a new market leader.
You are on your way to success… the sun is shining in a blue sky, you are in love with your project and it makes grow your wings… but sometimes the journey to attract private investors can be longer, more challenging and difficult than expected.
Here are 4 important tips to attract investment in making private investors falling as well in love with your company, to build a long-term relationship to support your growth and generate attractive value.
TIPS 1 – Put yourselves in the shoes of a private investor…
If you want to attract investment and make investors falling in love with what you do… you need to understand their investment strategy and their own challenges. You have to make sure you will be a good match. As a product has to find its market, a company has to find its investor. The good matching is key to avoid losing time in your fundraising process and more importantly to build a long-term relationship bringing your company to success.
First of all, you have to enter in contact with private investors active in your fields of activities to ease the process. In any case, you need to know that private investors do understand technologies from fundamentals to their exploitation. Do not underestimate their ability to assess your solution from the early stage development to its market potential.
If you have the feeling, they do not understand what you do, then ask yourself the right questions. Private investors do understand your technology, but they may be convinced neither by your differentiation nor by your business model to exploit your solution. They do understand what you do but they may not perceive the value of your solution. So, change your focus. Do not concentrate on what and how you do it, prefer focusing on what your solution will bring to companies to make them pay for it.
Putting yourselves in the shoes of a private investor means also considering that private investors belong to investment teams. The job of a private investor can be summarized as generating a return on investment– in a limited period of time. Private investors are reporting to their Lead Partners investing in the funds and looking for profitability. Their results are assessed at the fund level.
The decision to invest in your company does not only rely on the investor you are meeting and discussing with but on the fund investment team. The investor you have met has to persuade his/her team of the value potential of your company and on the investment attractiveness. Your investor contact will be your champion, the one promoting your company among other potential investments under discussion at the private investment fund level. So, to increase your chance of success put yourselves in the shoes of a private investor and provide them with all the relevant information they need.
Even if an investor could fall in love with your technology and solution, the investment decision will not be limited to the technology potential. The technology could be great, but it won’t be enough.
Investors invest in company that demonstrates its ability to become the leader in its market.
TIPS 2 – Understand what “market attractiveness” means
When you are meeting with private investors, they are assessing the market attractiveness.
What does it mean actually?
It means that investors are assessing the market size to define if the market is sufficient for a group of leading companies, and then if you could be a part of it. The lower the market size, the lower the number of companies that could live on it, and thus the higher risk for the investors.
The market attractiveness is also assessed on the most attractive business model. If the business is challenging, if the access to market is already dominated or under the control of specific players, then you will face real challenge to persuade investors to join you.
Then you should think outside the box and assess how you could disrupt the existing market. How you could impact the current organization of the market and offer a new business value to customers. If in doing so, you have the ability to generate recurrent revenues for your company, then you will have a win!
However, developing a disruptive technology while disrupting the market with a new business model can be really challenging and considered as quite difficult to achieve. Especially when you are a new player.
So be realistic on your plan and demonstrate your ability to deliver. At the end of the day, the investors will invest in your team and your ability to drive your company to success, your ability to overcome challenges with a high level of agility and determination.
TIPS 3 – Build your private investment network not only when you are looking for funds
Whatever we do, our network is key. It applies as well to private investors. If private investors hear about you from the network then you will catch their interest. It will definitely help the investment process.
Building your network can take time and you have to consider it when your fundraising strategy is ready.
You have to be aware that networking is already a part of the fundraising process. You have to develop your investors’ network while working on demonstrating the feasibility and attractiveness of your growth strategy.
We highly recommend to drive the 2 actions in parallel! Start to build your network even if you are still consolidating your technical and commercial strategy. But do not start introducing your plan to investors before you are fully ready. This will come later. Keep a part of mystery and work on the teasing…
In other words:
On one side – focus on your operations:
- Demonstrate your technology works and reaches expected performances
- Engage customers pipeline to showcase that your solution is addressing the market needs and engage purchasing decision
- Build an attractive business model to ease your market access and sales revenue
- Engage collaborations with the right partners to support your entry into production and market access with a relevant roadmap
- Attract the right team, the one that will have the ability to execute.
In addition – develop your investors’ network:
- Join high level events with participation of top-level private investors so you can showcase your expertise while entering into discussion on hot topics. Wait for your company development plans to be clearly defined before introducing the investment opportunity. Meanwhile, develop your intuitu personae towards private investors. Build a relationship where your expertise and leadership are recognized.
- You should not spend your time in many events but select the ones where you can reach the right targets for your network. INPHO® Venture Summit is a good example of an event dedicated to building a relevant network with high-level executives and private investors active in deep tech. Private investors from Silicon Valley, Europe, and Asia are meeting every 2 years to challenge bankable technologies and promising companies with hard talks and in an open-minded way. Such an event will allow you to learn what private investors are looking for and how to reach their investment criteria.
- Develop relationship with recognized successful entrepreneurs who have themselves good private investors networks. It is always good to learn from them and to build an advisory board in the early stage of your company development. Your advisory board will be a valuable label demonstrating that key people are persuaded of the attractiveness of your company and that you benefit from strong advice to drive you to success.
TIPS 4 – Do not make fundraising your ultimate goal
Keep in mind that not all companies are attractive to private investors but it does not mean the company not attractive for private investors is not a good company. Private investors have specific metrics to align with their fund targeted performance. Do not adapt to your plan or vision to address such metrics. The ultimate goal is not to attract private investment, the ultimate goal is to build a profitable and long-term business. Keep focusing on generating sales and business relationship, it is the best way to demonstrate your ability to execute and finally engage investment in your company.