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Making Your Start-Up Attractive for Investors in 2021

by Sumera Rizwan 2 months ago in startup

Pandemic 2020 calls for businesses to evolve

Making Your Start-Up Attractive for Investors in 2021
Photo by Mikita Yo on Unsplash

“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity.”

― John F. Kennedy

If you are considering launching a start-up one major thing to keep in mind is how to make it attractive for the investors.

2020 was the year of crisis and change, now an important thing that will attract investors is the ability of your startup to evolve and stand change.

You still need to have a solid business model, a desirable product or service, a worthwhile target market, and significant proof that you and your team have the skills and experience to grow the business. However, the secret ingredient investors will be looking for after 2020 is the ability of your product or business to progress in case of crisis.

If your product or idea is targeted towards the pandemic situation, investors would need to be assured how it would stand out in case things return to normal.

The following points should be kept in mind to attract genuine investors

1. Know your business inside out

The first thing that is required for your business to stand out is your knowledge and research about your product and its market.

Having a detailed, clear, and replicable business model is going to be one of the essentials to getting an investor to sign on to your business.

Your business model should be scalable, as investors don’t look for a static business, but one that involves considerable growth and has a good plan for achieving it.

For a business model 2021, you should be clear about how your business could work both under lockdown and normal circumstances.

Your business knowledge involves a lot of research, do your research, and talk to potential customers. There are several questions you should ask yourself. Has it been done before? Can your idea be patented or protected? Is your idea suitable for the post-COVID-19 situation?

When you have the complete knowledge and evaluation of your business/idea you will be able to present it is a way that attracts investors and answers all their concerns.

2. Target investors that understand your business

Reaching the right investors is crucial, you should try to attract investors that are relevant to your business and idea because if they don't understand it they wouldn't want to invest in it.

An online search should reveal your investor's interests as well as the portfolio of companies that he/she has invested in. Looking for investors who have invested in or funded similar companies is also an important step. You will need to take a close look to find investors who will be drawn to your company’s profile

3. Present your team in a way that investors would want to work with you

Investors are investing in you. Convince them that you are the right person/team to do the job, and gain their trust. If you’re the type of person/ team the investors see themselves working with, you’ve won the battle.

Once they like /trust you they are more likely to consider your idea /product and invest in it.

4. Clearly present the profit you can make for them

You will need to have a business model or a business plan that shows just where you sit in relation to your competitors. The main thing that attracts investors is the profit you can make for them.

For example, say an investor gives you $10,000 in exchange for a 10 percent stake in your company. Your company goes on to make an average of $20,000 per year. You would need to pay your investor $2,000 per year, which works out to an estimated payment of $166.66 per month.

Investors are concerned with their own profits so you need to present a clear and realistic picture of the profits you can gain for them keeping the post-COVID 19 situations in mind.

5. Cash flow and a financial plan

Think about your financial models from the perspective of cash coming in, cash going out, and how much cash you need to keep this afloat until you make money.

If you can clearly present a picture of your cash flow and market plan you can earn the trust of your investors.

6. Show what you are capable of

“Good ideas are common — what’s uncommon are people who’ll work hard enough to bring them about.”

– Ashleigh Brilliant

A great way to attract investors is to have a bit of traction as it demonstrates your ability to see your ideas through and it gives investors a glimpse of where you may be headed.

If investors see that with just a little bit of money you can do what you’ve done, they will be able to trust you with their money.

For investors, traction minimizes risk. It’s a chance to see how you perform and what you’re capable of. To demonstrate traction you might recruit a good management team, start making sales, build an advisory board, or secure strategic partnerships.

7. Accept COVID 19 as an opportunity

The COVID-19 outbreak has induced changes in societies, consumer habits, and needs that could uncover valuable business opportunities for start-ups that are able to anticipate these changes.

For instance, demand for remote working, e-commerce, education, and health services are changed in the medium run and global value chains are transformed.

A Startup that recognizes these changes accepts them as opportunities and is capable of tackling short-term challenges is likely to attract investors.

 Sumera Rizwan
Sumera Rizwan
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Sumera Rizwan

Editor and writer with a Computer Science degree, with stories curated in over 15 different topics at Medium ,she writes from her heart and aims to touch the heart of her readers

See all posts by Sumera Rizwan

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