When should I contact an investor?

How do I get investors and capital?

There are countless ways to develop a business idea and fund it. You can

  • mobilize private or public investors,

  • ask family or friends

  • Apply for funding,

  • Wager your own money or

  • take out a loan from a bank.

Which way is the right one for you depends on the investment amount you are looking for, the business idea, the overall financial framework and also on you as a person. The dream of the Self-employment without equity is actually a fairy tale. You always invest in your business idea, be it time or money. Prototypes are paid for from their own savings, unpaid test runs are carried out in their free time or a marketing company causes a sensation among consumers in a large-scale campaign. However you turn it around, you need start-up capital - sometimes more, sometimes less.

As long as you are thinking on a very small scale, you won't be making big leaps. But if you want to take off, greater efforts are required. This series of articles looks at Not with the smallest start-ups, which are practically brought to life in a quiet little room and which do not require any noteworthy sums. It is aimed at all those who actually need five to six-digit amounts - be it to start a business or to expand.
 

Our series on investors and capital

This series is about founders and experienced entrepreneurs who want to build a business on a larger scale with a solid financial concept or who want to expand it with another important component.

Classic financing through the bank is a common method of getting money. But banks are not exactly known for supporting innovative concepts or even promoting entrepreneurial thinking. They want to do business with well-off, forward-thinking entrepreneurs, but on the rocky road to success they are often very reluctant to commit themselves. Entrepreneurial risk is not their business; they prefer that the risk remains with the entrepreneur. In short: the self-employed have a hard time getting bank loans on fair terms if they do not have a solid financial basis.
 

What can you expect in this series?

This series presents financing alternatives to the bank. In this part Find out what you can learn from the protagonists of the television program "Die Höhle der Löwen" in terms of finding investors and raising capital. The following sections provide you with information on these financing options

  • Crowdinvestment

  • Trade fairs in Germany

  • Investment with family & friends

  • Investment with customer capital

 

The lion's den: what is it about the high-profile television format?

There are alternatives to the bank. One of them is telegenic: the lion's den. The show presents business ideas from various founders and entrepreneurs in numerous individual episodes. It is now the subject of our consideration because entrepreneurs looking for investment capital will find themselves in similar situations. You have to present your business idea and ask probing questions from potential investors. In the program you can see what the challenges for entrepreneurs are and how you can meet them skillfully.

As seen in the “Die Höhle der Löwen” format, founders and inventors, entrepreneurs and business creative minds only get a few minutes to come up with new business ideas, projects or complete concepts in a so-called Investor pitch to introduce.

The first question to think about is: How did the founders make it onto the show and why are the financially strong investors (the Lions) interested in it? The participants had to fight to get in touch with the bosses of the big companies that make up the circle of "lions". You too have to go this way. You need to find suitable investors and make an appointment to get a chance at an investor pitch. Perhaps one of the lions 2018 could be considered for your project?

Carsten Maschmeyer, The owner of the early-stage financing company "Sed & Speed" is an economic expert and one of the best-known German investors in the financial sector.

Dagmar Woehrl, Lawyer and entrepreneur with broad political and economic knowledge.

Frank Thelen, clever self-made man and specialist for start-ups, especially with apps.

Judith Williams, Shareholder in numerous companies, operator of a TV sales channel and extremely knowledgeable about marketing, sustainability and product quality.

Ralf Dümmel, Managing director of a company in the non-food sector. He is the “pope” of sales and brings household, outdoor and beauty products en masse to supermarkets and stores via his network.

At least that is what you need to get financially strong investors for your business idea:

  1. Contacts with potential investors.

  2. A well-engineered concept.

  3. A coherent assessment with regard to the level of participation in relation to the capital contributed.


The Lions Den is a helpful example of how you can attract investors

The lion's den is an exaggerated television format in which the details are presented in a highly pointed manner. But the program shows the principle behind every conversation with an investor whom you want to convince of your business idea. Anyone who has studied the show for a while realizes that at its core it is always about the same thing. If you do not have suitable and satisfactory answers to the following questions, it will be difficult to find an investor - whether on television or otherwise.

  1. Is your idea easy to copy? If so, your chances are bad, because then another company with more money could steal your good idea and force you out of the market.

  2. Is the idea scalable? Investors want to make money and therefore they want to ensure that the product or offer can be reproduced practically infinitely. This is the only way you can “turn the big wheel”.

  3. Are you the right person to make the business a success? If you make a well-structured, well-considered and self-confident impression and can satisfactorily answer profound questions about the business, this gives an idea of ​​intensive industry and business knowledge. That is the least that investors expect because they are putting their money in stranger's hands.

  4. Who is involved in the business? Ideally, you are the sole owner or bring the person with you who also holds shares in the company. Investors want to know exactly who they are dealing with.


How do you get into the lion's den?

Did you watch the program and do you think this format is the right platform for you? Do you know the processes and requirements that multi-million dollar investors place on founders and entrepreneurs? No? Then you should do your homework thoroughly.

If you want to raise large amounts of money, you need to prepare very well. Get as much information as you can about the potential investors and tailor your application as precisely as possible to them. Whether Judith William, Ralf Dümmel or Carsten Maschmeyer: every investor has their own special focus. Ralf Dümmel will certainly not jump on a fintech idea and Carsten Maschmeyer will not sell an innovative dish brush with you. It's just not their business. It's up to you to tailor your pitch to the right investor. Make your choice and act wisely to gain access. By the way, there are many roads leading to the TV show's well-known investors. You don't necessarily have to go to the lions den. You can of course also send your concept directly to one of the investors. Also, remember that even if you can't convince a Leo, you will be seen by millions of people. This can also result in new opportunities.


Find individual investors outside of the TV format

The Internet offers many opportunities to find individual investors. Enter the term “find investors” and you will get a list of over 12 million entries. There are investor networks such as the well-known business angels. And lesser-known platforms also bring investors and entrepreneurs together. It is also worthwhile to look for potential investors locally. Local Rotaray clubs, sometimes even private banks or business associations, host events where donors and money seekers meet. In fact, there are numerous business and start-up fairs, networking events, and investor pitch events at which you can present yourself. Always consider the target group to whom you are presenting your idea. Finding investors can be tedious and involve a lot of work. But it is well worth the effort if the much-needed capital is found in the end.


Do you have to surrender shares?

Yes, in the vast majority of cases you have to surrender shares or accept other means of influencing. Investors participate in your company. They don't give you a bank loan. Investors want to exert influence, steer fate and for that invest more than just money.

Some investors become through your network really interesting. This shows how important it is to find out about potential investors in advance: If Ralf Dümmel only had money but no sales network, he would be a much less attractive business partner. When he invests with you, you have the virtual guarantee that your product will be sold in thousands of stores. Ralf Dümmel stimulated demand and ensured increasing sales figures.

Or if Judith Williams didn't have a sales channel through which she uses permanent advertising to bring millions of people to purchase decisions every day, she would probably not be an interesting investor in hand creams or other beauty products. But she is able to show your product on TV and she has a loyal customer base. If your product appears in Judith Williams' infomercials, you will almost certainly achieve higher sales figures than would ever have been possible without the investor.

Many investors are not just donors, they make a significant contribution to the success of a company. So think carefully about which investor is the best for your purposes - and then take off. You have nothing to lose, because even if you are rejected by the television broadcaster and none of the investors you have contacted respond, you have already laid the foundation by preparing your application documents that will serve you well on your way to finding a suitable investor will prove.


The investor pitch: This is what a convincing short presentation should look like:

 

The show “Die Höhle der Löwen” showed with numerous examples what a pitch can look like and what does not go down well with potential investors. If you do not come from one of the industries presented there, the following guide for the perfect short presentation can help you, to get potential investors to support you financially with your idea.
 

1) Preparation is the be-all and end-all

The core of the investor pitch, the short presentation, is only a fraction of what you need to prepare to be well prepared. In terms of content and rhetoric, your short presentation should leave nothing to be desired. Which content you have to deal with is explained in detail in the second part of the article. Besides that, you have to be prepared for inquiriesthat you have to answer in a meaningful and precise manner.
 

2) A gripping start

To attract the attention of potential investors to the company, the product and the service, the entry must be successful. In many cases, storytelling is a popular means of choice. That means: tell your audience a story. Each story also appeals to a certain extent to the listener's emotional world. For your search for an investor, this can mean that you convince the funder directly or that he will remember you or your story very well - if the pitch and decision are followed at different times.
 

3) Persuasion from start to finish

An investor pitch is an appearance in front of mostly unknown people. This means that it is unclear whether investors are looking for an idea to invest in or a promising founder. As a rule, it is a little bit on both sides that has to be right in order to finally convince the investor. To be convincing in this context means to spray a mixture of competence and sympathy. From the first word to the end.
 

4) The common thread

In the preparation phase for your investor pitch, you should put yourself in the shoes of your audience. If you do this, it is comparatively easy for you to pack all of your content into a presentation in a well-structured manner. Look for a common thread running through your pitch. This allows the listener to follow you effortlessly.


 

You should definitely answer the following questions at the pitch


Who is presenting their idea here?

Name that Company name and briefly explain who to team heard and which Business model is behind your team.
 

What problem is being solved here?

At this point you should explain as specifically as possible which Problem the target audience did and how you like this Solve problem can. You have to describe how perfect Your product for the current market fits. They also need to be able to demonstrate that the design as well as the business model and distribution channel fit the product.

This question is closely related to the real question Product description. In order not to lose the audience in the pitch, it makes sense to include small breaks and, after the problem has been solved, go into the detailed description of the product or service.
 

What is the USP of the product?

At this point it should be described which Advantages the product compared to the competition. Work yours unique selling point carefully.
 

Which world of numbers does your company describe?

Now it's time for many founders to get down to business, because it is important to shed light on the world of numbers surrounding the product or service. Which sales or reactions can you prove? Ensure transparency and good values ​​without making the numbers look beautiful. You should also describe the market volume and the competitive situation in as much detail as possible. This shows the investor that you have dealt extensively with the topic.
 

What are the financing requirements?

If you have managed to captivate the potential investor with your pitch, you now have to tell him how high the financial requirement is in numbers. Formulate precisely, whether you need capital or imagine Contacts or support in terms of entrepreneurship from the investor. Also one possible form of "repayment" you should already identify yourself.