Most start-ups do not have a tremendous amount of own money and need to look for external financing in order to enable decent growth of their business. Thus, they look for rich individuals, business angels, venture capital funds and other potential investors who can provide money and support. The first question is, when you should look for an investor. The first and obvious answer is when you are in need for finance, either to launch or to scale your business. However, entry of investor usually does not mean only money, but also senior advice and access to broad networks the investor has. It is often argued that a good advice from an experienced business angel may have even bigger impact on your business than investment itself.  There are different types of investors relevant for the different phases of businesses life cycle. In an early stage of your business, business angels will be a likely type of investor you can meet. Experienced individuals with large business experience who were in the past senior managers, investors or entrepreneurs themselves, earned substantial amount of money and are now willing to support start-ups.

Right timing (in detail depends on a particular type of investor):

• • something substantial in developing the idea is already done, ideally everything what can be done without external financing
  • time, effort and/or your money (and money of your family) already invested
  • first sales (if possible), growing sales (the best)
  • you are able to demonstrate that investment will help you grow your business quickly
  • it takes time to negotiate, you should approach investors at least half a year before your business actually needs their investment
  • also, investor may demand changes in your business before the investment is made, and it takes time

Before approaching the investor, you should have clear answers on two questions: What do I need? What do I offer? The first question is related to how much money you need now or in the near future and for what it will be used. You should not suggest your salary, rather investments into sales and marketing, product development, intellectual property rights,  internationalization or cost efficiency improvements. You should be also able to estimate how much money you will need in a medium term in case your business develops well.

On the other hand, investor will want a part of equity from you. In most cases, investors take a minority in supported businesses because they want to have entrepreneurial team motivated to grow the business. But the actual share depends on negotiation, amount of money needed, uniqueness of the business idea, IP existence, and various other factors. It is usually good to negotiate, approach always more investors than one (even if they are not interested in investing in you, they can provide good feedback) and have so called BATNA (best alternative to negotiated agreement) ready in order not to accept the deal that would be bad.

In nowadays Europe, there is a plenty of people who have enough money and are looking for investments. However how to identify those, who might be interested in your business, who may provide more than money, who are not complicated personalities that would make your business endeavour too painful and who would in general make a good fit?

One of the usual ways is to participate in various events – networking events, business plan competitions, hackathons, innovation days, relevant entrepreneurship conferences etc. in which these people participate as well, often as jury members or mentors. They are also looking for good businesses to invest in.

A recommendable way is to get introduced through the shared contact, it can be through a friend of your father who is an entrepreneur or through your university entrepreneurship professor. The point is, if you are introduced through a person the investor trusts, you substantially increase the chance that he/she will agree to give you an appointment.

Obviously, you can also try to identify a good investor from secondary information sources. Maybe the company from a similar field that he/she invested few years ago is now being sold for a substantial amount of money to multinational corporation or goes public and hits the newspaper headlines. Or your friend knows a friend who got investment from that person and it helped him to scale the business. Be active, try to identify more potential investors. It will help you to negotiate later on and to select that entrepreneur who fits you the best.

Elevator pitch is a short sales pitch that provides a summary of your business (idea) to another person in a very concise way in the time span of an elevator ride, i.e. approximately thirty seconds to two minutes. You should practice it well, because if you master it, it is your chance to get attention of an important person who might not otherwise pay much attention to you. E.g., when you randomly meet a well-known investor during a conference coffee break.

Recommended structure of a short elevator pitch:

• • First sentence: For (target customer) who (statement of the need or problem), the (product/service) is a (product/service category) that (statement of benefit).
  • For parents living in broader Prague area who look for better elementary or secondary education for their children, da Vinci School offers affordable and inspiring environment supporting children’s integrity, motivation, self-confidence and social skills.
  • Second sentence: Unlike (primary competitive alternative), our product (point of primary differentiation)
  • Unlike in most other schools, we put a huge emphasis on teachers’ personality - their main job is not only to transmit knowledge to children but to inspire them to develop desire for fulfilling their innate potential.

If you have some more time than a few seconds, you should try to cover especially the following topics:

• • Briefly describe what you sell. 
  • Who is your target market? Industry, market size
  • Who is your competition and what is your competitive advantage
  • How you make money? Revenue model

• • You and your team's background and achievements, senior advisor, if you have some

If you were successful in raising investor’s awareness, you are invited to present your business in more detailed manner. It is a great chance to make another successful step in attracting investment. You should make sure that you are able to avoid mistakes that new entrepreneurs often do. First group contains business related mistakes, such as not being able to present how your product or service solves the customer’s problem, not knowing the market well, not being able to describe uniqueness in comparison with competition or raising doubts about your ability to execute. The second group for mistakes is related to coming unprepared - investors do not like it. You should try to know everything about your particular market, different brands, customer preferences, frequency of buying and factors influencing customer decision to buy.  Similarly, you should convince investors that you are fully dedicated to your project. If you tell them that you plan to keep your job in corporation in the beginning, it will not work.

Useful tips for pitching: Besides the content of the business idea itself described in Fiche Business Model, it is also important to gain the investor's positive attention when presenting him/her with the business idea. Some inspiration can be obtained from watching Dragon's Den (see links below), some other recommendations for effective presentation include:

• Preparation
  • Suitability for investors. Be ambitious BUT realistic! (small bakery will not work but new airport will not work either)
  • Come well prepared, know your business really well, but don’t learn presentation by heart
  • Come well dressed, dress may be aligned to the particular market focus
• Persuasive communication
  • Don't focus much on the details of your products and services, but on how it brings more added value to your customers when compared to the competition.
  • Show something tangible: a model, picture or a web page of your product or firm.
  • Be persuasive, enthusiastic and believe in what you are saying. The investors must trust that you are a really motivated entrepreneur.
  • Self-confident, but not arrogant. Passionate and enthusiastic.
  • Good team matters.  Be able to sell founding members’ capabilities and experience. Let the team to join the presentation with their expertise. Investors need to believe in the team.
  • The vision of scalability.
  • Try to get the investors' attention at the beginning with something what arouses their business interest: „We strive to change the paradigm of primary education.“ „Google looses two billions USD each year by … „
  • Try to tell the story behing. Use pictures to illustrate it.
• Content

1. Present well done market analysis (see “Market analysis” fiche for details) Industry description and outlook – What is the current state / life cycle of the sector? What are the current trends? Expected market growth? Target market - Target customer segment(s) and why? Market size(s). Primary customer group. Early adopters. Competitive analysis – Deep understanding of your competitors, their strengths and weaknesses. The way how to differentiate. Respect your competition. Present your competitive advantage in a positive way; i.e., what you can do, not what your competition cannot do.
2. Sales & Marketing – prove early success, clear strategy
3. Finance - Know the numbers well! Investors are strong in financial calculations, so do not let yourself get trapped. Present that financial logic works well unit-wise (costs of unit sold are lower than revenues) as well as overall (scalable, highly profitable, growing). Be able to present the expected return on investment.
4. Implementation - Idea itself is not worth millions, persuade investors you can really execute

• Format

At least you need two files: a catchy powerpoint / prezi slides and financial model in excel