If you intend to secure external funding for your startup, you may consider seeking investment from angel investors. Angel investors are affluent individuals who provide capital for business startups in exchange for a share of ownership equity.
Angel investment serves as a first round of financing following initial seed funding from family and friends. Additionally, angels are often successful entrepreneurs, business executives, or attorneys who can offer management, leadership, and guidance to your startup.
This series of posts aims to provide insights into the criteria angels consider when investing in a startup. These posts will assist you in understanding an investor’s perspective and assessing whether they would be willing to invest $100,000 in your business. Utilize these posts as a tool to evaluate your business’s strengths and weaknesses.
Regarding funding options and methods, please refer to my post “Funding Your Start-up The Jugaad Way” for alternative and potentially less costly ways of raising capital. Regardless of your chosen funding path, it is imperative to prepare a well-crafted investment pitch that can significantly impact the success of your startup launch.
#5 Pie in the Sky—Financials
This post is titled “Pie in the Sky” because when you project the revenue your business will generate, it appears ideal. However, launching a business that, on paper, generates no revenue is unrealistic.
Financial projections for potential investors must be based on quality metrics, hard data, and market research. Simply stating that your product is targeted to teens in Asia with 450 million potential customers and plans to sell your Apple-beating, iconic-destined product to all of them at $300 will not attract investors.
Investors seek well-thought-out, logical, and plausible revenue plans. Most financial plans do not achieve their projected timeline, so they will evaluate a plan with the assumption of negative revenues to begin. Therefore, build your plan on sound, hard data, and do not be concerned if the numbers seem excessive—they need to be to attract investors.
Include in your plan your projected gross margins across increased productivity. Provide a management plan for your speculative cash positions. These are crucial variables to communicate. Utilize spreadsheets in your presentation to demonstrate and support your revenue plan.
Thrive Venture can assist you in developing a comprehensive and detailed revenue plan. Contact us to explore how we can help.
– Tyler, Founder and Principal Consultant
Thrive Venture Consulting—connecting people and ideas.