In my humble opinion, there are two key metrics any investor will look at.
The founder/team and experience.
In the initial, I struggled trying to raise the sums I required, as I was a one-man-band, with very little experience in the industries I was venturing into. Be under no illusion, no matter the quality of your concept, investors will only entrust their precious cash with a founder/team, they place faith in taking the concept to fruition.
My tip tips for addressing this would be >
1. Attempt to build a consortium of advisors.
If you can sit in-front of an investor, and demonstrate a number of relevant advisors (no matter the capacity of their involvement - could be a couple of days a month advise etc.) that you can readily call-upon, this demonstrates astuteness and networking. The tipping point for me was building a pro-bono team of senior experts. When sitting in-front of an investor with a team of people who fill-in the 'lack of experience' gap, your position changes drastically. Attempting to build such a team is a great way of stress-testing the quality of your concept also. You would be amazed how many seniors will give-up their time, and commit to helping (especially) young entrepreneurs with sound concepts. A good starting point would be the IOD (Institute of Directors). For a young entrepreneur, getting into spaces that are populated with not only potential advisors, but plenty of cash heavy individuals, is a networking heaven. The IOD offer special deals for students, and provide all sorts of golden 'infrastructure', to help you achieve investment.
2. Take any and every opportunity to sit-in front of anyone willing to listen to your pitch.
No matter their relevance, your pitch will change hundreds of time throughout the journey. People who aren't necessarily industry stakeholders, will so often pick-up on 'outside the box' thinking, that can change your pitch for the better. Also, I cannot emphasise enough just how well networked this world is. I have had discussions, at all different levels, which have by coincidence dug-up the most incredible connections.
3. Don't be shy to share.
One of the best decisions I ever made was giving four senior partners a small stake in the company (B shares). Not only does this incentivise everyone, but it is often a great way of attracting people who genuinely believe in your concept.
This aspect of the investment will develop with point 1. Some of the best advice I have been given in this process is to approach any 'pitch-like' scenario, with asking for the recipients opinion/advice, rather than trying to sell them something. Why? a) people are far more likely to want to help you should you express appreciation for their opinion, and b), you'll get a far more honest opinion, which will in time, only improve your pitch/concept. The way you present yourself is incredibly important. Running off my views in point one, not only does your concept need to develop, but the way in which you engage people is paramount to any success. (Adopt the phrase "Inform, listen & learn).
As a basic structure, ensure you address the following:
- Does your company have the potential to achieve sustained growth?
- Does the management team have the necessary skills?
- Does the probable return on investment justify the risks taken?
- Does the investment match the fund's investment criteria?
Mitigating capital risk. If you as a start-up can demonstrate an appreciation of the capital risk, it goes a long long way. Suggestions in respect of this:
1. Create a draw-down fund.
Ask your investor for a sum of X, that is drawn-down over a period of time. You can also attach performance to this, in building milestones against the drawn-down.
2. Develop a pilot.
Not only will this process improve the product/service you are developing, but it will create comfort for you investor seeing the success of the trial.