Apr 03, 2023
Timing your investor approach to perfection
Approaching a prospective investor about injecting some capital into your business can be daunting – and understandably so.
Firstly, you’re likely to be approaching somebody who is already a successful businessperson, and potentially doing so ‘cold’ unless you’ve already been introduced. Then you have to consider that your potential investor will receive countless requests for their involvement, and so you’ll have to go the extra mile to stand out from the crowd. Finally there’s the fact that you’ll probably only get one shot at it (as anyone who’s watched Dragon’s Den or Shark Tank will appreciate).
But that doesn’t mean that it’s an impossible task by any means, and targeting the right investor at the right time can make a big difference to your chances. This blog can help you understand when to approach an investor, and the best way to go about it.
Your pre-approach checklist
If you’re asking the question “when is the best time to approach an investor?”, then the simplest answer we can give you is “when your startup fulfils certain criteria”. What this criteria is can vary a little depending on the nature of your business and the investment you’re looking for. However, from our experience of considering startup investment opportunities, we normally consider these five as the most important:
- Broad experience in leadership team: ideally, you will have a co-founder team of between two and four people, who collectively complement each other with tech skills, market expertise and business acumen
- Solid foundations: you should be able to demonstrate that your business has survived for at least 7-9 months
- Proof of initial funding: if you’ve found funding from friends or family to get you through your first few months, helping you develop your MVP, this will show that you’re committed to your concept and to outside investment
- Market validation research: you should show evidence of market validation work, where you have spoken to 20-40 potential customers and analysed the results in detail
- Online presence: you should already have an extensive presence on all relevant social media channels, such as Facebook, Twitter, TikTok, YouTube and Instagram, depending on the demographic of your target audience
The next steps
If you feel that you’re ticking all five of the above boxes (or are at least very close to doing so), then you can begin to search for investors to approach. Even if you’re finding it difficult to meet this criteria, we strongly recommend not cutting corners and approaching investors anyway: it will be better to wait until you’re in the right place than rush things.
It’s important to remember that, unless you are extremely fortunate, you won’t achieve the investment results you want from the very first person you meet. Be prepared to pitch your idea to many different investors, and while you may face a lot of rejection, always be proactive in looking for feedback that can help you refine your pitch for the future.
Why there’s never a perfect time
While all of the detail above can give you a better chance of securing the investment you’re looking for, there really is no hard and fast rule of when the ideal time to make an approach is. All you can do is make sure you’ve covered as many bases as you possibly can at your end: evaluate your business goals, consider current market conditions, and have a well-defined growth strategy in place that clearly aligns with long-term objectives. Those are the things that investors will want to see, and being able to demonstrate them clearly will improve your chances substantially.
It’s also important to say that you shouldn’t necessarily be put off from making approaches because of the current turbulence in the global economic landscape. In fact, if anything, it may even be a better time to get in touch with investors: times of recession and economic stagnation tend to lead to a slowing of the pace of investment. This means that investors have more time to consider opportunities, do their due diligence, and listen to what startups have to say.
While a slowdown may mean that valuations and offers decline in monetary terms, it also improves the likelihood of you getting a deal – and even if it’s not the figure you were looking for, it’ll still be a lot more than nothing.
At InfinityVC, we’re always on the lookout for investing in ambitious, tech-driven startups. Learn more about what we do, and the types of business we’ve driven to success, here.