by Tom Larkin, cofounder and CEO of Social Rebate
As Transamerica’s youngest-ever partner, I’ve examined, modeled, and invested in several thousand companies. Drawing from my experience on both sides of the handshake, here are five tips for attracting investors:
1. Focus on developing your idea.
Understand the problem you’re solving, recognize your market size, and identify the most effective channels to that market. And most importantly, do one thing well; solve one problem not a set of them. Facebook may be a jack of all trades now, but it had to nail the connecting friends part first. Investors like to see an entrepreneur that has developed expertise in one area, not competence in many.
2. Be nimble.
Investors like to see passion but it should be tempered with flexibility. Be willing to take feedback and tweak your model, especially in the early stages. Doing so will demonstrate adaptability and an ability to think on your feet – two vital qualities of an entrepreneur.
3. Know your competition.
Stay up on the VC blogs and be familiar with other players in your space. Be honest about your competition in speaking with investors. But also be prepared to explain how you’re different. Many entrepreneurs do a strong job of research up front, in the idea formulation stage, but fail to continue it through the development stage. In today’s fast-paced startup scene, new players are entering and exiting constantly. As a result, it is necessary to make a daily habit of research.
4. Know your investor.
In keeping with research, make sure you’re pitching the right person/people. Study up on their areas of interest and past investments. It may sound obvious, but I can’t tell you how many pitch meetings I’ve sat through in which the entrepreneur hadn’t done their homework on me or my areas of interest/expertise.
5. Perfect your elevator pitch and get it out there.
Start out your pitch by introducing yourself and immediately addressing the problem you’re solving. Then, offer your company’s solution to that problem. Quickly provide an overview of the competition in your space and describe how you’re different. Make sure you can point to a few impressive data points and/or tangible example(s) of customer successes. And above all, leave them wanting more! The elevator pitch should peak an investor’s interest, not give away the farm. Err on the side of brevity. Some entrepreneurs, fired up by their idea, want to lay out their ten year plan and laundry list the reasons they’re the next Amazon. Investors hear hundreds of pitches, so it’s important that yours is concise and packs a punch!
6. Be realistic about your valuation.
Fired-up entrepreneurs have a tendency to believe their idea is worth more than it is. A savvy investor can sniff-out unrealistic valuations, so do your research and offer a realistic price tag. Early Stage investors are taking a huge amount of risk. They need to be amply compensated for taking the leap.
7. Stay in Touch.
Investors hear a lot of pitches, so it’s necessary to stay on their radar. But, keep in mind, there’s a fine line between being assertive and being pesky. Here’s one trick for avoiding the latter—include news updates or new data in your follow up. Instead of bombarding a potential with e-mails asking for “Any news?”— offer them the news. Keep them abreast of exciting new data, accomplishments, news coverage, etc. Doing so is a subtle way of implying that others may soon be interested, meaning the clock is ticking.
Tom Larkin is Co-Founder & CEO of Social Rebate, an e-commerce solution that converts customers’ purchases into Social Media marketing. Prior to starting Social Rebate, Tom was the youngest partner at Transamerica, earning the Principal designation at 26. Tom co-managed two top-performing small cap portfolios, and was the lead analyst for over a third of the economic sectors covered in the company. He has been involved with entrepreneurial pursuits for the last 6 years.