8 Tips on How to Attract Seed Capital for Your Startup
If you wish to make a better impression with potential seed capital providers, start off by asking them for advice on what you can do to make your startup more attractive to investors such as themselves. In contrast, if you immediately hit them up for money they go on the defensive. It’s human nature. If you don’t believe me take a moment to imagine what you would feel if a someone you just met minutes before asked you for money.
Do your homework on investors before approaching them. Find out which industries they invest in. A great way to lose credibility is by approaching a software industry investor with a food or golf club startup. People like to invest their money in areas that they understand. Few investors are gamblers when it comes to business. (The occasional trip to Las Vegas is a different matter.)
Find out what size of investment they prefer to make. If you are seeking $5 million in seed capital then there is not much point in chasing the small fry who limit their participation to $25,000.
Focus on local investors. Despite the Internet investors invest in people they can meet face-to-face and get to know first. Moreover, studies have shown that investors prefer investments that can be reached in an hour or less by car in the event there’s a problem. No one wants to have to hop aboard a plane for 5 hours to have an emergency meeting with the founders.
Don’t waste your time chasing investors in the “off season.” Wealthy people tend to be unavailable during the months of December and August and sometimes July. They spend these times with family. Don’t lose any time or energy on an exercise in futility.
Find investors through other entrepreneurs. Look for companies that are in the same space as yours but not competitors and meet the founder. Then ask them who their seed capital investors were and if you could get an introduction.
Have a story to tell that draws people in. The story needs to explain why and how your startup came to be in a way that makes the listener identify with it or the problem it is attempting to solve. In recent years more than a dozen books have come out on how to become a good story teller.
Finally, if you can’t raise startup capital from outsiders, learn how to create it with cashflow engineering and other advanced entrepreneurial tricks. It behooves you not to leave this step for last.