Here are the parameters you should use in sizing your request—and be able to explain in justifying your request to investors:
- Consider implied ownership cost.
- Type of investor.
- Company stage.
- Calculate what you need, and add a buffer.
- Investment terms.
- Single or staged delivery.
- Use of funds.
How much money should I ask for investors?
If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. The investor would be buying your company five times over, and he doesn’t want it. If your valuation is around $1M, you can validly ask for $200K–$300K, and offer 20–30% of your company in exchange. Type of investor.
How do you attract investors?
- For small amounts – consider friends and family.
- Look at things from the investor’s point of view.
- Value your business sensibly.
- Make sure your plans enable investors to make money.
- Have a credible business plan.
- Spend enough time on your financial forecasts.
- Always ask for enough money.
- Provide investors with an exit.
What do you say to an investor?
Here, distilled from their discussion, are five tips for talking to investors:
- Don’t cold-call potential investors. Use your network instead to connect with angels or venture capitalists.
- Talk about market need, not market size.
- Acknowledge the competition.
- Show investors where they fit.
- Practice your pitch.
How do investors get paid?
Pay the investor in installments each month. Decide on a fair sum to be paid each month based on the share of the business that is being given up and the income that the business generates in the previous year. For example, say an investor gives you $10,000 in exchange for a 10 percent stake in your company.
What do investors get in return?
What rate of return do investors expect? In general, angel investors expect to get their money back within 5 to 7 years with an annualized internal rate of return (“IRR”) of 20% to 40%. Venture capital funds strive for the higher end of this range or more.
What are investors looking for?
In summary, investors are looking for these five things:
A management team they believe in. An idea with a large market and a competitive advantage. A company with momentum or traction. An idea that will generate cash flow.
Who is a private investor?
A company or individual that takes their own money and uses it to help another business or individual is known as a private investor. They invest in small or large start-up businesses, as well as businesses that have been operating, but have run into hard financial times.
How can I impress an angel investor?
Angel investors provide capital, connections and experience typically in a syndicate, and here’s how to attract them to your startup.
- Get the fundamentals right. People make great businesses.
- Know the angel audience and pitch accordingly.
- Provide an opportunity for angels to value add.
- Be deal ready.
- Be realistic.
How do you structure a deal with an investor?
So here are a few tips about what to look out for to get a deal that works for you:
- Don’t give pro-rata rights to your first investors.
- Avoid giving too many people the right to be overly involved.
- Beware of any limits placed on management compensation.
- Request a cure period.
- Restrict your share restrictions.
How do you start a conversation with an investor?
I landed a short meeting with a potential investor thanks to a warm introduction. Where do I start the conversation?
- Get to Know Them.
- Be Clear and Concise.
- Start With Background.
- Sell Your Method, Not Your Product.
- Ask Questions to Build Trust.
- Discuss the Person Who Made the Introduction.
- Find Out What Caught Their Eye.
How do I convince an investor to invest in my startup?
How to Convince People to Invest In Your Startup
- Start small — trivially small — and then build up.
- Make three people love you. Then 10. Then 100.
- Ask for advice, not money.
- Be authentic.
- Consider an equity crowdfunding campaign when the time is right.
- Leverage the ‘social proof’ from crowdfunding.