Sponsored post: this article is sponsored by RLC Ventures. RLC Ventures invest in seed stage businesses with incredible ideas and immense potential. Based in London, they are seeking dedicated entrepreneurs to support and drive business growth and success.
When investors look to invest in a potential new business, one of their biggest concerns is about the potential risks involved in investing. Their primary goal becomes to de-risk, and they go through a series of questions including; “what are my chances this company will succeed?” and “how much do I have to lose if it goes wrong?”
Many startups only have a minimum viable product and are comprised of only a few members. Venture Capitalists and seed stage investors look to invest in the people more than anything else at this particular stage of the business formation. They look at the individuals and their teams as an evaluation of their success at the seed-stage for investing.
The investors already have a broad idea of the traits they’re seeking. So this is what you should ask yourself before you enter the boardroom and pitch to an investor:
1. Do you have a strong team?
“Great things in business are never done by one person. They’re done by a team of people.” – Steve Jobs
The strongest teams are those with members who each have strong experience and something individual to bring to the table. They are all ready to work towards the same vision with the same end goal in mind. Ineffective communication is ranked the biggest barrier of team effectiveness.
Investors also look to see if you’re adaptable. Perhaps a potential issue with your product is raised even in your initial meeting. If you don’t have a plan on how to fix that raised issue, what is your process for dealing with it?
2. Are you 100% dedicated?
“Any job very well done that has been carried out by a person who is fully dedicated is always a source of inspiration.” – Carlos Ghosn
As investors, we are going to invest all of our efforts into your idea and help you to succeed. So it is only fair we receive the same. It is expected that entrepreneurs will invest themselves into the product too. The companies that stand out are those who have a dedicated team with a clear vision for their company – led by someone who has this work ethic.
One of the most successful entrepreneurs that we have invested in spent two years devoted to his startup and without a salary. Investors are real people who want to work with people they get along with, who share a similar hard work ethic, and who share a vision for a growing business.
3. Are you branding yourself?
“Be Yourself, Everyone Else is Already Taken” – Oscar Wilde
If you are setting up a company today, investors want to know who you are. You can start off simply by setting up popular social media accounts including LinkedIn. Many companies look at your personal LinkedIn and even Twitter – they’re looking to see if you have the relevant experience in the company you’re trying to build. For example, have you successfully launched a product before? If you’re starting a new technology product, do you understand how the infrastructure of the product works? Do you have the rights to the product or does your tech team own all the code?
What does Twitter tell you? Are you in the know of the industry itself? Are you reading articles about the current industry of your product? How about self-branding? You want to be of interest too and to stay relevant on a day-to-day basis.
We believe branding yourself will help attract the business from companies that you want. A brand message shared by employees on social media gets 560% more reach than the same message shared by the brand’s social media channel.
Importantly, you want to be careful of the image that you project of yourself. Remember, often you are marketing yourself as a person to an investor as much as you are marketing your startup.
4. Do you have clarity of your pitch?
“Having knowledge but lacking the power to express it clearly is no better than never having any ideas at all” – Pericles
An investor doesn’t need fancy words to be convinced that your product or service will work. They want an explanation in the clearest and simplest terms so that anyone can understand what the company is trying to achieve.
Try to pitch your business idea in one sentence even for your own benefit. Sometimes, overly complex pitches make investors think if you’re deliberately trying to confuse them with some details in your pitch. So stick to keeping it simple.
5. Do you have financial management knowledge?
“The only source of knowledge is experience.” – Albert Einstein
How good is your understanding of working capital and can you manage your finances? 82% of businesses fail due to cash flow problems. Good financial understanding of your product means you’re using your funds sensibly and first allocating them to essential resources.
Investors want to know how long it will take for you to give up on your product if you run out of resources. Can your company sustain itself for a minimum (non-negotiable) of 12 months? You’ve probably been working on your product until now, can you launch without additional funding?
Investors don’t want to see you run out of cash in 4 months because you don’t understand what resources are necessary and which ones are flexible. Your understanding of finances also signals to your capability of running the startup itself.
6. How are you going to scale?
“Growth itself contains the germ of happiness.” – Pearl S. Buck
What are the capabilities of the company and how well can the company cope with increasing workload? Good scalability means the performance and efficiency of processes will improve even with greater operational demands. Check how realistic the projections for revenue per customer and revenue per acquisition are.
Some entrepreneurs are unaware and unable to identify this potential (often conversion prospects from B2C to B2B products) while other are reluctant to change their existing business model. Adaptability is key, and ensures the business model will allow for cash flow even when revenues are low. The product may have a trial period for which the company follows a pricing structure, but can the price bands be easily converted after the initial period to fulfill the revenue projections.
7. Do you understand your market?
“If the facts don’t fit the theory, change the facts.” ― Albert Einstein
Check the company assumptions. Make sure that the company projections can really be achieved. Many pitches tend to overestimate projected sales. Other things to take into consideration are market shares, and the competitors’ projected market share. 42% of them identified the “lack of a market need for their product” as the single biggest reason for their failure.
These are our golden tips to pitching to investors during the seed stage to help you take your company to the next level.
This article was written by: Reece Chowdhry (Founder) and Zixuan Wang (Operations Manager) of RLC Ventures.
Based in London, RLC Ventures predominantly focus on seed and early-stage startups. Click here to learn more about RLC Ventures and their funding opportunities