My best advice about obtaining investment capital is to look for angel investors in places you wouldn’t think to look. Many investors don’t drive exotic cars, or wear flashy clothes. Quite often they live in a simple house; they might even live next door to you.
They are typically hardworking white collar professional people, often in sales, but may be doctors, dentists or even entrepreneurs. These people have liquid capital and they enjoy working with the excitement of a start-up company.
Here is a bullet list showing necessary documents and strategies before you begin pitching investors.
- Having a completed business plan (executive summary)
- Three years of financial projections showing your burn rate
- Subscription Agreement completed by a competent corporate attorney with experience in private offerings
- A Private Placement Memorandum detailing the risks
- A minimum/maximum amount of capital you intend to raise
- Offer an initial low stock purchase price for the first $25,000-50,000 of investment made in the company. This entices Angel Investors to make a purchase before they miss out. Then raise the stock purchase price on the next level of shares.
- Anticipate that you will need to raise some cash to pad your numbers in your plan. You don’t want to run out of cash before you make it to profitability.
Show your potential investor how you are able to run your company efficiently. Bootstrapping is extremely attractive to investors. I paid $1 per chair and $5 per desk in my last business. My phone system was initially built for less than $6,000 when the best price I could get from a vendor was $150,000. My CTO (Chief Technology Officer) built the system which worked way better than the expensive system would have ever performed.
Your investors want to know how you are better than the competition and what you're going to do to keep getting better.
You may need to pitch hundreds of investors to secure that capital you need. Start your efforts as soon as you know you are going to need it and don't quit until you have the money in the bank.
Investors will often make promises to invest, but it's never really done until you have the money in the bank. Don't stop til you get enough!
Let me know what you think? Do you agree with this strategy? What would you do differently to secure capital?