Keep your elevator pitch short, ensure that your presentations are not too long and also do not go there expecting your VC to sign an NDA before he listens to your idea
Preparing yourself for an investor meeting can be quite stressful. There are hundreds of articles online that should help you prepare yourself for your first investor meeting. These articles stress on a few important points – keep your elevator pitch short, ensure that your presentations are not too long and also do not go there expecting your VC to sign an NDA before he listens to your idea.
But going to an investor meeting is much more than the elevator pitch and a presentation. In this article, we will take a look at a checklist of items that you need to be ready with before you meet with your investors.
If you have been watching Shark Tank, you should already be aware of the kind of questions that investors ask entrepreneurs that they meet with. Put yourself in the shoes of these participants and prepare a response for the questions that are frequently asked. It is important to know all your business numbers. This includes your monthly revenues, month-on-month (MoM) as well as year-on-year (YoY) growth, turnover, net profit, cost of production and marketing costs to mention a few. The more numbers you know off the top of your head, the better prepared you come across to the investor.
How many times have you heard the phrase, ‘ideas are dime a dozen, it is execution that matters’? It is not realistic for an investor to sign an NDA with every investor he meets and neither should you insist on one before meeting your investor. While this advice is standard for the first meeting, entrepreneurs should insist on the signing of an NDA for the second or third round of talks. This is when you are likely to be sharing confidential business numbers.
Not signing an NDA at this stage gives the investor a free pass to share and collaborate with other parties on information that is confidential to your business. Make sure that your NDA is addressed to the correct legal name of the entity you are talking to and specifically lists the various details that are being shared with the investor. As much as you are desperate for money at this stage of business, insisting on an NDA is your right at this stage of negotiations.
Your Reserve Price
Startup funding, like any other business transaction, involves a lot of back-and-forth negotiations and bargaining. Investors like getting maximum value for their investments and want a larger share of your business for the money they put in. From an entrepreneur’s perspective, losing equity not only reduces your control over the company you founded, but also reduces your leverage in future negotiations. A good strategy is to decide on a reserve price (equity that you would like to give away for every $100,000 in funding that comes your way) and double the asking price. For instance, if you would like to give 20% of your equity for $500,000 of funding, seek this amount for 10% of equity. You might ultimately sign the deal at the reserve price.
Know your investors
Investors are not just about the money they put in your startup. They are a part of vital business decisions you take and are ultimately the bosses you shall be ‘reporting’ to. This is why it’s important to pick an investor whose business philosophies and values matches with yours. In addition to this, it is also important to know why an investor would want to invest in your business. Is the VC already invested in other startups in your industry? Do they have experience scaling up businesses in your niche? Knowing the answers to these questions can help you know your investors’ rationale and help you decide whether this is a good engagement for you.
Bringing an investor on board can be life-changing for a startup. Keeping yourself prepared with the checklist above goes a long way in demonstrating ability and also helps you in seeking the deal you want.
Featured Image Credit: 123RF
Author: James Hawkins,
Puslished Date: August 25, 2017,
Published Time: 11:02 am