What does it take to turn a dream into a successful startup? There are a lot of factors that drive success, and one of the integral forces is the support of investors—financially and strategically.
While startups with 100% ownership look appealing to entrepreneurs, external investor connections are necessary for growth. The Indian startup ecosystem is the third fastest-growing ecosystem in the world, and investors have played a big part in this achievement.
From the angel investors to the institutional VCs, all are working towards the common goal of supporting innovative startups! That’s why today, we will discuss the role of investors in converting a startup dream into a thriving business and how to approach startup investors for funding and mentorship.
What is the Role of Investors?
When we think of investors, it’s relatively common to think of them as the financial backup and nothing more. However, in reality, they offer dynamic
support to entrepreneurs for startup growth, supporting entrepreneurs throughout their startup journey:
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Validation and market credibility
The first step in making your startup dream come to life is converting it into a realistic business model. However, the process doesn’t end there. You must validate the business model and startup idea to determine whether they are viable and will function in the real world. That’s where the investors can help you.
It is essential to understand what investors look for in startups. They focus on investing in startups with innovative ideas, scalable business models, and market demand or traction. So if an investor is showing interest in your startup, you have won the first stage! Angel investors and early-stage venture capitalists often provide the first external funding, validating the idea and boosting your startup’s credibility.
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Financial support
The investors’ primary objective is to provide the funds necessary for the startup operations and promotions. The financial support is crucial for the
startup’s growth, especially in the early stages. Connecting with angel investors is essential for the startup dream to turn into a reliable business. 21BY72 is one such angel investor network that provides opportunities for startups to connect with investors.
In 2021, the total angel investment was around $12.7 billion, which was triple what it was in 2012 ($4.6 billion) (source). Therefore, investors have been the major contributor to India’s position as the third fastest-growing startup ecosystem.
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Strategic support
Investors are often industry experts looking for innovative ideas that can revolutionize the industry. Many established businesses also provide corporate capital to help prospective startups grow so that they can integrate their offerings to increase their business.
In any case, investors are more than just fund providers; they play the role of mentors and help your startup sail and tackle any tricky situations. Therefore, investor connections are essential for startups to grow. These investors provide strategic support by providing guidance and empowering your decision-making process.
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Exposure to market resources
Investors are primarily motivated by profits. As a result, they can assist you in getting essential supplies for your startup at the best possible pricing, as well as locating trustworthy partners by expanding their network.
How to approach Investors for Startup Funding?
Put this question into Google, and you’ll find an infinite amount of recommendations on how to impress investors for capital. But where do you
start when looking for investors? We are here to help you find startup funding investors efficiently! There are a few things you need to do to find and secure investors:
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Build a realistic business model.
Building a realistic business model gives you insights into what you need for your startup dream to become a reality. Thus, by creating a business model, you can estimate the funds, resources, and mentorship you’ll need from the investors. The understanding sets the ground for you to seek investors and create a strategy on how to approach startup investors.
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Research relevant investors.
Investors come in multiple categories. However, not all of them are suitable for your startup stage. For example, angel investors are more likely to invest in a pre-seed or seed-stage startup. However, the VCs are more equipped to offer significant funds to a growth-stage startup. Therefore, based on your needs for funding and guidance, find relevant investors who are exposed to your industry. Use social media, leverage your existing network, work with startup incubators and accelerators, and attend networking events to find these investors.
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Attend networking events.
The key to securing the funds is networking for startup funding. Networking allows you to explore diverse types of investors and select a few who can help your startup grow. Startup events like the Global Startup Summit allow you to establish your market presence and connect with the investors. Therefore, you can start with a light conversation to get familiar with them, win their trust, and later move on to securing a pitching opportunity. Networking also allows you to find and build a reliable network for investor leads, referrals, a validating the startup.
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Make a memorable first impression.
First impressions are essential. So, make sure it is unforgettable. Give a short introduction of yourself, your startup, and how it’s performing. Ask open-ended questions and give them valuable information as well. If you are talking through email or text, be clear about your intention and mention your startup stats to engage them in the conversation.
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Create a compelling pitch deck.
Your pitch deck is a thorough insight into your startup. Therefore, if you want to impress the investors, you must make it engaging and highlight your strong points. The pitch should include what investors look for in startups, such as the scalability of the startup, market traction, team size and expertise, revenue model, financial trends, and more. Include statistics and charts and avoid lengthy paragraphs to keep it neat and simple.
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Tailor your pitch
Tailor your pitch to the investor’s profile and the values they prioritize in their funding process. It helps you boost the chance of securing the funds.
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Be prepared for queries.
Each pitching session ends with a series of question-and-answer rounds. So, do your research and practice pitches in pitching competitions to gather the most commonly asked questions and prepare some modifiable answers.
Conclusion
Investors are the main characters that make your startup dream come to life. The investors play a vital role by validating your startup with the funds, and their guidance helps you tackle any problem a startup faces. They help you build connections in the industry and provide easy access to resources for cost-effective and quality production.
When you need to find investors, start by building your business model to estimate your funding and guidance needs from the investors. Based on these needs and the startup stage, you can shortlist the relevant investors and approach them through social media, e-mail, or networking for startup funding. Networking is the best option for building investor connections for startups and building a market presence. Create a compelling pitch and pitch deck to impress the investors and secure the funds.
FAQ
1. How to find investors for startup growth?
When you are focused on finding investors to help your startup grow, you should be focused on investors specializing in your industry. The investors
often provide you guidance to navigate the difficulties and find resources to help you tackle any problem. Building relationships through mutual
connections and engaging with investor networks like 21BY72. Be prepared with a well-crafted pitch deck and clear business plan to demonstrate your startup’s potential and attract the right investors.
2. What are the benefits of networking for startup funding?
Networking is essential for gaining access to funding opportunities. It allows you to build relationships with investors, mentors, and other entrepreneurs, expanding your professional circle. Networking events, accelerators, and incubators offer direct exposure to potential investors while providing valuable insights and feedback. These connections can lead to funding, mentorship, and partnerships that accelerate your growth. Additionally, a strong network enhances your startup’s credibility, making it easier to attract investors who align with your vision and long-term goals.
3. How do I attract investors to invest in my startup dream?
The process of attracting investors starts by understanding your startup and its strengths. Create a compelling business model to identify your strengths regarding market trends, demand, customer base, competitive advantage, and revenue trends. Showcase your vision and the team’s expertise to achieve that vision and how investors can benefit from it. Transparency and enthusiasm for your vision will help establish trust and inspire investors to support your startup dream.
4. How do I maintain a relationship with potential investors?
Maintaining investor relationships involves consistent communication and transparency. Share valuable resources and regular updates on your startup’s milestones, challenges, and achievements through emails or newsletters. Seek advice and involve them in key decisions to show you value their input. Attend networking events or host gatherings to keep them engaged. Demonstrate accountability by meeting deadlines and delivering on promises. Building a relationship based on trust, respect, and mutual interest ensures that potential investors stay interested and willing to support your journey.
