When startups need investments and where to look for them – Finmap experience

Finmap Finance Accounting Service recently received a grant of $ 50,000 from the Ukrainian Startup Fund. In his column, service co-founder Olexandr Solovey tells when startups really need investments, where to look for them, what needs to be prepared for the pitch, and why investors may refuse you.

At the very start of the search for investments, you do not always understand where and how to move. We collected this knowledge along the way, and I share it to shorten this path for you.

When to think about attracting investments, and how much are they needed?

Not always an investment – this is manna from heaven. They help accelerate development, but not all investments are equally useful. As well as being implemented in the right direction, they can easily be simply “merged” without obtaining the expected results. This usually happens in two cases:

• After attracting investments from individuals or by lending, when you yourself manage the money and do it not quite rationally.
• The second – when attracting money from investment funds at a time when the business model has not yet been fully confirmed, there are no tangible number of customers, and you are not sure of the repeatability of your results. With such introductory notes, on the whole, the chances of getting this kind of investment are low, but even if this happens, the strategy is quite risky.

In order to protect yourself from two not very positive scenarios, it is better to initially make sure that there is an audience that is not only interested in your product, but who else is willing to give their hard-earned money for it.

Before you start communication with investors, prepare answers to questions, and most importantly – numbers. Everyone loves the specifics. You should have answers to these basic questions that are usually covered in the pitch:

1. The issue. What problem are you working with, and why did it arise.
2. Customer portrait. You need to know to whom you are selling, and whether or not you really close their pains.
3. Market volume. You must have concrete evidence in the form of research: why do you think that the size of the market you are going to enter with the product is just that.
4. Your decision and its advantages. You must understand whereby you close the consumer pains that you talked about. You must have a “killer features” that will distinguish you from competitors.
5. Competitors. Good understanding of the market and the main players in it.
6. Team. Very carefully you need to talk about who is working on the project, because, in fact, the money trusts the team, and not just you.
7. Investment Implementation Plan. You should have an understandable strategy according to which you move on – where you will send money, and what result they will bring to you.

The whole pitch should be as short and concise as possible, because usually from 3 to 7-10 minutes + time for questions is given for the presentation.

Regarding the questions that are usually asked – everyone wants specifics. You always need to operate with numbers, not sensations.

Once this information is already in your hands, you can “go into the fields” and begin to communicate with funds and private investors.

How to start talking with investors and where to look for them?

There are several options: private investors, funds and lending. Consider the first two of them.

Private money

This is exclusively networking. Many in the CIS space perceive the word “networking” in the selfish sense, but in the Western world, on the contrary, it is very welcome and encouraged.

In order to attract the money of private investors in your project, you must first be in the appropriate society. How to enter it?

1. If you dig in completely, then the first thing to do is turn to a psychologist asking: “Why do I have such an environment, and what needs to be changed in myself?”. Not everyone can agree with this, since the topic is controversial, but here I am setting out my personal opinion. Our environment is a reflection of what is inside us and vice versa. Therefore, it is worth starting development in this direction with deep installations and their analysis.
2. After you figure out yourself, you can join various business clubs that provide access to meet people you need. Usually you can get a membership for money, but it should be taken as an investment in your future, which will definitely pay off.
3. We are building a personal brand and are actively transmitting our position through social networks. This is important, because when meeting people in the same business community, you are likely to “make friends” on social networks. If your profile can talk about who you are, what you do, and also show that it catches the audience, then you automatically become a more interesting person for the interlocutor and inspire more confidence. In addition, useful contacts can be made through communication in the social networks themselves.

Funds

Funds – is not only about investments, but also about strengthening the company with the expertise that they can provide you. What actions should be taken to find investments from funds?

1. Join associations relevant to your business, as networking also plays an important role in working with funds. For example, we are a member of the fintech associations of Ukraine and Kazakhstan. Communicating with the members of the association you can get their experience in attracting investments and a complete picture regarding the funds and how they function.
2. Look for investment programs suitable for you. Here google to the rescue. There are many sites that publish collections of funds by direction, country, program and condition. Funds have various conditions: for some, the passage of their accelerator is mandatory; for others, the founder must be fully engaged in the project and so on. Depending on your needs, you can choose the programs that will meet them. The only thing, in any case, it is important to see what kind of expertise these funds have, and how they can help you, and not go anywhere to raise capital, because that’s not all.

Why you may be denied:

• The weak team without industry expertise.
• Small market.
• The product is not relevant to the market.
• The product is an extension to another product. Let’s say a startup based on Google’s algorithms. Google is changing the algorithm — your product is no longer relevant.
• The competitive advantage is not enough, because there are already strong competitors in the market where you want to work with trump cards up your sleeve.

These are only 5 examples, but there are a considerable number of them.

The last in priority, but not in importance, that I would like to note: perhaps those who have just started to search for investments have the illusion that they will attract them the first time. I do not want to be a pessimist, but this is not the most frequent occurrence.

Even if at this particular moment you receive a refusal, at the same time you gain knowledge of what exactly needs to be developed in the business.

In our case, for example, even earlier, a venture investor in the process of communication indicated to us a large outflow of customers. Then, in the OS thread, when we focused on attracting customers, we did not control much how many customers were leaving us. Since that time, the outflow of customers has fallen six times in five months, which could not but have a positive effect on our results in general.

If you learn to hear feedback and use it correctly, then often it can be the most valuable investment for you.

Source: ain.ua