Investors are searching for a solid investment that offers a healthy ROI in a reasonable time frame, as well as a founding team that is confident in its ability to achieve its objectives. Many factors influence that decision, but the choice to invest ultimately comes down to the capacity to profit from that investment and belief in the team’s ability.
Investors, who over time either maintain or lose faith in a business, are the stakeholders that truly drive overall organizational value. The business purpose strategy and performance (risk) appetite of the business is what determine investor trust.
A successful business has a well-defined and solution-promising product, as well as a clear vision and a problem that it seeks to address through its offerings.
Start-up founders don’t always have the resources – time, personnel, expertise, and technology – to organize their financial dealings. It could be difficult to strike a balance between transparency, vision, and financial foundations when you have so many other commitments and goals to fulfil.
Start-ups lack the resources they require to draw in investors and most investors need to hear every element of the business explained to them clearly over time.
What makes you a more suitable choice for an investor than other solution providers? Can you gain their trust? Here are some suggestions on how to build investor trust during your fundraising journey.
Be transparent and honest
Every investment is a risk, but investors make the most secure bets by conducting rigorous due diligence on a start-up’s financials. Investors want to see the facts, not just assertions. They want to see a solid financial basis and thesis in place to support the start-up’s objectives for effective scaling.
Start-ups will find it simpler to raise money if they are open and honest about their financial situation, as well as their strengths and weaknesses and if they are forthcoming with any information needed.
Show up on time
When raising money, investor meetings are essential. These meetings are typically necessary to present the relevant information or even to update the existing investors.
Meetings of this nature shouldn’t be taken for granted because they typically result in positive outcomes. Attend meetings on time so that the investor will know you respect both their time and their words.
Follow up well
Always follow up right after a meeting with prospective investors. In it, mention anything noteworthy that happened during the meeting to remind everyone about the key objectives of the meeting and even the necessary next steps. This one is so simple, but regrettably, entrepreneurs don’t often do it.
Even worse, founders mostly find it hard to follow through even when requested to do so following a call. Alternatively, a follow-up can be done a few days after promising to do so. What is important is that you follow up and be on time.
Stay clear and straightforward
Potential investors nowadays currently have access to a wide variety of investment options available to them. Vetting an opportunity can be complex and difficult for the typical investor since there is a lot of noise and commotion. Some companies pressure potential investors into choosing before they have a chance to review the deal, while others have them compete with one another to increase the amount they are willing to invest.
These strategies might succeed once, but they leave investors with a negative impression and do little to foster trust. Avoid using increased sales techniques and concentrate on the fundamentals if you want to get the trust of investors. Follow the best practices to achieve this, then allow an investor to choose freely after thoroughly comprehending the possibility.
Don’t get defensive
The major reason why investors have so many questions is that they are inquisitive and want to learn as much as they can about a company quickly.
As a founder, you must constantly and repeatedly remind yourself that investors are simply trying to learn more about you and your business; they are not making personal or professional criticism of you. When investors start asking you questions, try not to become defensive. You don’t want your potential investor to lose interest or grow sceptical about your business.
Provide the investors with knowledge
Be ready to share knowledge on what they need to know about your industry with potential investors so they can evaluate any offer they are thinking about, not just yours.
You are offering solutions and preventing them from making costly mistakes in their investments. This will show the investor that you know the nitty-gritty of your industry as well as demonstrate your willingness to share information and will win you the trust and respect of many investors.
Have a clear vision
Investors are seeking companies with the ability to expand despite all the challenges they face in a bid to take calculated risks. Most businesses fail, and the future is frequently uncertain and never certain.
Investors want to support companies that have both a clear vision for growth and a practical strategy to get there. Both ambition and practicality are important. Start-ups that have a solid plan in place, supported by as many key elements as feasible, can attract more investors to their mission.
One of the most essential components to the success of any business is the willingness of investors to make financial investments. All investors, regardless of size, first give us their trust before they give us their money. As a result, to succeed, start-up founders/entrepreneurs must learn how to win and maintain investor trust.