Chasing Capital: How to Communicate Your Business’ Value When Seeking Funding
In the world of startups and venture capitalists, validity is king. Simply put, no established lender or VC will fund a business without a good track record, as most VCs base their decisions off the startup’s year-over-year revenue and financials. So how do you communicate your track record if you have only being operating for a short period of time? For any company – particularly startups – communication is a key driver to attaining capital for your business. Here are the fundamental elements of communicating your startup’s value proposition to secure funding:
Create a Comprehensive Business Plan
The first step is to create a coherent and comprehensive business plan to communicate how you aim to achieve profitability. This plan should contain a few concrete, real-world examples of ways to move the business needle forward while also providing a bigger picture to your long-term goals and objectives. For example, if you have a product or service launch coming up, identify and communicate the positive outcomes from the launch (i.e. cost savings, time savings, efficiencies, etc.). Ideally, your business plan should communicate a well thought out value proposition for your investors and potential customers with the goal of ultimately securing monetary support or funding. Put yourself in the investor’s shoes – if your startup’s product or service provides value, then people will use it and if it doesn’t, people won’t.
Bear in mind that pitching a business that is still trying to secure proof of concept is not a sexy look. On the other hand, a business that is legally validated in the form of a tax ID number, bank account collateral and legitimate employees shows traction and further legitimizes your business past the point of ideation.
While the above example won’t be enough traction to garner much attention from the investment community, it begins to give your startup momentum.
Communicate a Viable Competitive Strategy
While VCs are always on the prowl for the next “big thing” like a Google or an Uber, they also don’t want to hear unrealistic pitches. Maintaining an opportunistic but realistic approach when pitching makes your startup appear more credible. One way to do so is to identify your startup’s competitive landscape and define your advantage over these competitors to potential investors. Start by performing a SWOT analysis to then make the distinction of how your company is uniquely qualified to serve the needs of your target customer. The goal is to clearly and concisely convey the ‘why’ behind the ‘what’ and how your startup is more than qualified to meet your customer’s needs above all other options in the marketplace.
This is achieved by carefully crafting your messaging and value propositions to speak to the stakeholders. While this may sound like a simple task, creating an end-to-end messaging platform and leveraging marketing and media tools to distribute the message, requires more time and expertise. If you are not fully equipped to handle said task, partner with an agency that can assist you as soon as possible.
Utilize Strategic Partnerships and Build a Strong Network
There is no denying that paying customers are the best possible form of traction to receive funding; however, not all startups have paying customers. If your startup is especially young, partnering with an already established business will provide access to resources that may help advance your case for funding. We recommend utilizing strategic partnerships and collaborating with like-minded entrepreneurs who are a few steps ahead of you. The reason being, partnering with someone who can quickly bring recognition to your endeavor will help you get in front of the right investors. Ideally, these partnerships should be with entrepreneurs or businesses that are experts in your industry, thus complementing each other.
Such collaboration can accelerate the business faster than just money alone, but the key to success is finding harmony between both of your goals and objectives. These strategic relationships have a robust framework which includes shared visions, a proper cultural fit and mutual understanding to maintain autonomy.
At the end of the day, the investor is investing in Y-O-U, so come to the game prepared with a strategy.
Proof is Purpose
Today’s global business landscape is a blur of stakeholder and investor demands, increasing customer expectations and competitive obstacles. If one thing is for sure, it’s proof. Social proof is the positive influence created when someone, a VC for example, finds out that others are doing something, say using your product or service. Social proof typically sprouts from four different types of users: advisors, customers, the media and investors.
Think of it as building the foundation for massively scalable word-of-mouth. Having credible advisors is equivalent to a flashy, neon welcome sign to investors that your idea has serious caliber. Often, when a startup’s advisor has helped to secure series funding in the past, that influences the investors to support the startup.
Customers and users also boost a company’s legitimacy. In demonstrating market demand, startups will often invite users to create videos about their use of the product and/or service.
National media placements are a great way to flaunt and demonstrate the worthiness of your startup. Being covered in a reputable media outlet speaks to credibility on a whole other level. All startups should aim to be newsworthy and look for opportunities to show investors the coverage they’ve earned from the media.
Lastly, remember that VCs are people too. You are entering into a relationship with these people. Avoid losing site of the facts that are core to your venture’s value proposition. Be true to yourself as a thought leader and lead by creating, harnessing and delivering that value in your venture to your target audiences.
Now that you understand what’s at stake when pitching VCs, do you have what it takes to secure funding? Subscribe to our blog to receive industry insights and tips for best practices in communications.