How to Attract Investments for Existing Businesses and Ideas. A Step-by-Step Guide for Entrepreneurs

Author: Maryna Marynkevych, Director of Major Key, Partner at Network VC Syndicate Fund and Unicorn Battles, Mentor, and Lecturer at ISE Corporate Accelerator, Jury Member of Nordic, Central European, and Asian Rice Bowls Startup Awards.

Let's talk about the hot topic on every entrepreneur's mind: raising capital to fuel your business growth. We've come a long way from the days of solely relying on our own cash and traditional loans. The landscape has shifted, and now we have some exciting new tools in our toolkit.

Take a moment to think about the tech titans we all know and love – Apple, Microsoft, Amazon, and Facebook. They were a spark of genius in someone's garage! And today? They rule the tech world!

These aren't just feel-good stories – they're blueprints showing us how innovative financing can catapult a pipe dream into a global phenomenon. And here's the kicker: with today's fundraising opportunities, every entrepreneur has a shot at replicating this journey.

For projects with rapid scaling potential (especially innovative ones), a comprehensive fundraising ecosystem has emerged. It's like a support network on steroids – professional communities, incubators, accelerators, private investors, and venture funds – all designed to nurture your project's growth from one investment milestone to the next.

Since the early 2000s, we've watched the internet, IT, and computers put market cycles into hyperdrive. Now, AI is stepping up to the plate, promising to be a game-changer for most existing businesses. For entrepreneurs, investment literacy isn't just nice to have anymore – it's your secret weapon for staying in the race.

Even if a business scales through franchising, getting savvy with investment tools and learning to speak the language of investors and partners will pay off big time. In the franchise world, there's always room for that next big thing that hits the spot for customers.

Step 1: Fundraising Audit: Evaluating the Potential of Your Business/Project/Idea

One of the biggest pitfalls entrepreneurs face is misjudging their project's potential: the tendency to either underplay or oversell their project. It's easy to get caught up in the day-to-day hustle and lose perspective. So, here's a pro tip: step back from your daily grind and take a bird's-eye view of your venture.

I like to call this exercise "Where are we now?" It's like a health check-up for your business idea. Dive into the market trends, scout out your competition, and don't be shy about reaching out to experts for their two cents.

Remember, when you're face-to-face with potential investors, they're guaranteed to grill you about your competitive landscape. It's not just a box to tick - it's the backbone of your business plan and an essential part of your pitch deck.

• Market Analysis

When assessing market potential, it’s essential to gather statistics relevant to your industry. Pay special attention to the total market size and the forecasted compound annual growth rate (CAGR). These figures are like a compass, guiding you toward understanding the landscape and future opportunities for your project.

Example: In 2024, the revenue in the electric vehicle market is expected to reach an impressive $623bn globally, with a projected annual growth rate of 9.8%. In comparison, the commercial drone market is growing at 7-27% annually. If your market's CAGR (Compound Annual Growth Rate) surpasses inflation, and the greater the difference, the better – it's a strong signal for future business growth.

• Competitor Analysis

The most crucial part here is to correctly identify up to 10 main criteria for comparison and create a shortlist of 5-6 competitors closest to your business. To gather information, typically use:

• Open sources on Google
• Company websites

• The "Mystery Shopper" method

Company X competitive landscape example

1. Expert Survey

This method not only gives you an objective outside perspective but also brings valuable insights and can attract influential advisors and mentors. Ideally, you should survey 5 to 10 experts, but don’t underestimate the power of just 3 specialists’ opinions – they can truly broaden your horizons. Sometimes, the right advice at the right time can make all the difference!

Step 2: Packaging Your Business/Project/Idea in Investor Language

In the world of venture capital, there's a well-established culture of communicating with professional investors that has evolved over decades. It's crucial to understand the difference between engaging with seasoned investors and successful businesspeople from traditional industries who are just starting their journey as investors. With seasoned investors, you'll be up against many projects (some funds receive up to 30 proposals a day), so you need to be exceptionally prepared before initiating the dialogue.

Conversely, the process is somewhat easier with businesspeople who are new to investing, especially if they are part of your social network. You might encounter them while playing golf, on a yacht, in a sauna, or even at church. In these scenarios, trust, reputation, and your passionate enthusiasm with a steadfast belief in your goals are key. However, there are still two important steps ahead that you should not miss to bring the deal to a close.

Let's break down what is meant by "packaging" in investor language.

1. Teaser or Executive Summary, or Blurb. Think of this as your project's elevator pitch. It's a brief description used to capture an investor's attention right from the start. It should include key information about the project, so investors can quickly decide if they want to learn more. In other words, you have just a few seconds to capture their interest and spark a conversation. You can include a link to a one-pager for more details, and save the pitch deck for meetings or after signing an NDA (Non-Disclosure Agreement).

Example. A promising Ed-Tech startup with stable 3x YoY revenue growth.

Company X about (2 sentence description)

Seed Round: $1,5M

Industries: Ed-Tech, impact

ARR: 2021 – $89k, 2022- $265k, 2023 (8 months) – $320k, $800k+ total 2023 forecast

Profit margin: over 70%

Incorporation: the USA

One-pager (link)

Website (link)

1. One-pager. My preference is the teaser + one-pager combo. It's like the perfect appetizer before the main course (that's your pitch deck, which you'll serve up in person).

Your one-pager needs to be concise yet irresistible. It should contain the most impressive information about the project and be sure to include key points for the investor: projected profits, in certain cases calculations on return on investment, as well as a roadmap, which provides a brief overview of completed and upcoming tasks.

1. Pitch deck or project presentation. In the VC world, lengthy business plans have been replaced by pitch decks. Think of it as your project's Hollywood trailer. It contains all the essential highlights of a traditional business plan, but it's packaged for the big screen.

Now, here's the secret sauce: your pitch deck isn't meant to be a novel. It's your moment to shine in the spotlight, to tell your story out loud. So, keep those slides clean and mean. No one wants to squint at a wall of text! Think of each slide as a billboard on a highway – you've got seconds to make an impression. Stick to the headliners and let your infographics do the heavy lifting.

Step 3: Pitching. Your Moment in the Spotlight

Even if you're a smooth talker, pitching requires practice. If you have advisors, do a few dry runs with them or enlist a friendly investor for a dress rehearsal. This way, you'll walk into an important meeting feeling like you've already won.

Another pro tip: Keep it tight – 15-20 minutes is your sweet spot. Why? It leaves plenty of time for the good stuff – Q&A! That’s where the real magic happens. Short, punchy answers are your best friends; there’s no need to dive into unnecessary details.

For me, a serious red flag is when entrepreneurs dance around direct questions. If I'm asking about last quarter's revenue for the third time, we’re in choppy waters. Honesty and clarity? That’s music to investors’ ears.

I'll also share a few examples of the most common questions investors tend to ask:

• What’s your exit strategy?
• What’s your MoM (Month-over-Month) growth for the last year?
• What’s your CAC (Customer Acquisition Cost) and other unit economics
• Describe your competitive landscape and the biggest threat
• What’s the current round size and who has already invested?
• Is your technology patented, any IP protection?

Step 4: Closing the Deal

Nailing that pitch is just the beginning! Don't pop the champagne yet – we've got an important phase ahead: closing the deal.

After signing the NDA (Non-Disclosure Agreement), the investor gets access to the Data Room for a deep dive into your documents. But before you hand over the keys to your commercial info, it's smart to run a KYC (Know Your Customer) check on the investor. This helps ensure they're legit and trustworthy.

Data Room: Google Drive or similar services with restricted email access work best. It's way easier than playing email ping-pong with files. Plus, you can organize info into neat folders:

• Legal: company registration docs, patents, licenses, key client contracts
• Financials: P&L, tax reports, 3-5 year financial forecasts
• Presentation: pitch deck and other promotional materials
• Topic-specific folders depending on your business niche

The key moment? Signing the contract. But first, you’ll need to navigate negotiations and finalize the terms. For innovative projects, the most straightforward investment contract type is the SAFE (Simple Agreement for Future Equity). You might also encounter Convertible Notes, and less commonly, agreements to purchase company shares (more typical for traditional businesses).

Entrepreneurs often express concerns about losing control, dilution of their stake, and investors meddling in day-to-day operations. These pitfalls can be easily avoided by crafting a solid investment plan from the get-go and agreeing on the investor's rights and reporting format (usually quarterly) upfront.

Much depends on personal chemistry and business compatibility with your investor. The right partner can be a real game-changer: bringing in new investors, opening doors to potential clients, offering golden nuggets of advice, and even backing you up with extra cash when the chips are down.

In conclusion, I hope this step-by-step guide, based on my own experiences and those of my partners, proves useful and opens up new horizons for your business growth. Here's to your success!