You’ve found yourself a great start-up team and together you’ve come up with THE business idea – all that’s missing now is the necessary cash injection for it all to take off? Time for a few tips from UnternehmerTUM expert, Martin Giese.
Martin heads up of the XPRENEURS Incubator as managing director, a program that supports 40 to 50 high-tech startups at uNternehmerTUM in Munich in their early stage every year, helps them find the right investors, attract clients and successfully enter into the market. Martin himself is an experienced investor and has even written a book for start-up teams and a book for start-up teams about initial financing. You can find the first three chapters in German language free of charge on his website www.startupfinanzierung.com.
Here you can find out first-hand information about what makes investors tick and how to go about searching for investors.
Finding capital – How to get started
First of all: Opt for a sensible financing method! Venture capital is not the silver bullet and usually only comes into play at a later stage. First of all you should consider public funding or business angels. Even better, start out with bootstrapping or funding from friends or family. What’s essential in your first steps is your team – because every team member must invest their time and assets into the start-up.
What will land you the deal: your team or your idea?
Definitely your team! Those who want to invest their money well always prefer a strong team with an idea that can be developed to vice versa. No matter how brilliant your idea – if your team doesn’t represent it with full credibility, investors will steer clear of it. It’s all about trustworthiness. Your ideal team is complete and covers all important business areas – from product development to sales.
What other criteria make a difference?
Apart from the team, the market and technical feasibility of your business idea are the biggest risk factors for an investment. What’s decisive is the individual risk/return profile: Is the investor looking for a startup with a high yield potential and is prepared to take a high risk for it? Or is he or she happy with lower returns if this means a lower risk, too? Founders often overlook that fact that there’s a wide range of different types of investors – not just differences between VCs, business angels and banks, but also within these different groups.
Finding opportunities to pitch – harder than you might think
Investors always have an excessive amount of pitch requests and little time. That’s why you should approach your field of contacts in a highly strategic way. First of all, you definitely need someone who can establish initial contacts for you. If you don’t have a person like that, opt for other paths, e.g., an accelerator or start-up events. Without personal connection, even the most awesome pitch deck will get you nowhere – because you won’t make it to the pitch in the first place.
Where does XPRENEURS come in?
XPRENEURS supports start-ups in their early stage. The program looks after teams that work for their business idea full time and aim to enter the market with their product. Such teams are given three months of support in the form of office space, coaching and a dedicated business angel who provides consulting. What’s more, the teams will participate in training classes on all relevant subjects as well as very intense pitch training. At the end of the three months, the participating startups will be given the opportunity to make a presentation before a large audience on Demo Day.
How best to approach investors?
Study their profiles thoroughly before approaching them. Be sure to know why exactly you’ve decided on this specific form of funding and not another? What is at the heart of your business model and does it fit into the portfolio of your potential investor? This kind of research takes time and effort, but definitely pays off. If your team presents a relevant idea and has also a prototype and first potential client to show for itself, the chances of obtaining financing are quite high.
What does the first contact look like?
It’s actually a bit like a date: You’ll typically feel if the chemistry’s right and if it’s worth pursuing even at your very first personal contact. If after several more “dates” the next big step occurs, namely an investment, this is in fact a bit like getting married: With you’re contract, you’ll agree on a binding relationship and will possibly be working closely together for many years to come. Even if you’re thrilled about your collaboration and all optimistic about it at that point: It’s definitely worth thoroughly preparing the relevant paperwork.
Source: UnternehmerTUM (https://www.unternehmertum.de/en/topics/entrepreneurship/start-finding-capital)