Venture Capital

Venture Capital

How to attract investors to your small business

By Jim Ruth

For the small business owner who has not yet been out in the market seeking capital to expand the business, venture capital may conjure up a picture of investors eager to cough up the money you need just because your business sounds good to them. Don’t believe it. Venture capitalists are drawn to opportunities to make money, so you have to convince them that your business presents an investment opportunity with a high probability of significant return.

Be Prepared

Regardless of your business’ stage of development, the primary tool you have to attract an investor will be a good business plan. A well-constructed plan will show your potential investor that you have seriously considered the path your business will take, milestones on that path, and the requirements to reach each milestone.

That plan will cover three major areas that an investor will need to know about and be comfortable with:

  • The first area of importance is you. Tell them about yourself. Tell them how you brought the business to its present point and why you are the person to take it down the path you envision for it. There is no qualification greater than a proven track record. If you can show investors that you have been making money, it is easier to convince them that you can make more of it.
  • The second area is a narrative about the business. Tell the investors about the business concept. Tell them about the need for the business in terms that make it exciting to them. Explain the competitive environment and tell them how you will market the business to make your vision come to life. In preparing both of these, bear in mind that if you aren’t confident and excited about yourself and the prospects for your business, you are certainly not going to excite an investor. Don’t hold back. Be honest, but this is no place for modesty. It’s no place to be cautious about the prospects for your business.
  • The third major component to your business plan is the numbers. Tell investors how much money you need and how it will bring the plan to life. The more specific you can be, the better. Show step by step what the impact of the investment will be. Show exactly how you will make each milestone on the path to your ultimate vision for the business. Remember, you want to show investors that you have thoroughly considered every step of the way. Clearly explain the assumptions that underlie your projections and the reasons you have made those assumptions.

The Presentation

Make sure the entire plan is presented in a coherent, easy-to-follow format, and make sure that you are prepared to present it well. Let your presentation reflect your confidence in your plan.

You and your business plan: a hot combination to draw interest to your small business and convert that interest into investment dollars.