Everyone who has ever come up with a business idea knows the pain of trying to accumulate funding. There are a few straightforward ways to get this startup capital; if you happen to have a wealthy relative or have free cash of your own lying around, you’ll have a straight shot to getting the capital you need. Otherwise, you’ll need to pitch your idea to potential investors — and that means convincing them your idea is worth their time, money, and effort.
Dedicated investors will only part with their money if they think it’s going to bring something back to them in return. Your persuasion in seeking funding, then, needs to be focused on proving the value of your idea. Obviously, your financial model will come into heavy play here — you need to demonstrate, through numbers, that your investors will see a return.
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But how can you prove your idea will meet those numbers? One dimension stands apart in importance here: timing.
The timing factor
In a recent TED Talk, serial entrepreneur Bill Gross examines five important factors for startup success (including funding) and determined timing to be the single biggest indicator of growth and sustainability. Why is that?
Timing is all about striking a balance between consumer interest and oversaturation. You need to launch a business when interests and needs are on an upswing, but not so late that too many other startups beat you to the punch. As a historical example, thriving mega-company Google started out as just a well-timed search engine; one that emerged after consumers began to grow comfortable with search engines, but not so late in the game that it couldn’t make a name for itself. As a contemporary example, as SA Ignite explains, healthcare spending is about to turn a corner with our new president headed into office — this uncertainty and volatility could be a perfect time for new healthcare innovations and alternatives to emerge.
But what about…
Let’s take a look at some of the other factors at play here.
- Idea novelty is good — you need to be unique in the market or you’ll drown in competition and your audience will lose interest quickly. However, if your idea is so unique that customers aren’t ready for it, they’ll end up rejecting it due to its unfamiliarity. For example, Google Glass failed to take off in part because consumers weren’t ready for that level of wearable technology or augmented reality; it was too new and improperly timed.
- Having a strong leader is good — you need someone with experience to guide your startup’s development and ensure timely progress. However, even the best leader can’t do much about a target market that isn’t excited about a core idea.
- Having a talented team is good — these are the people who will help make your idea into a reality. However, again, only when the team’s efforts are coordinated on a well-timed idea will those efforts begin to pay off.
- Having a proven model is good — showing that there’s current interest in this industry showcases that there is money to be made. However, if you come to the party too late, consumers’ needs in this niche will already be filled, and there won’t be any more room for your idea. It’s possible to succeed in an oversaturated market by differentiating yourself, but you’ll have trouble convincing investors that it’s worth the risk.
Proving your startup’s timing
So how can you prove your startup idea’s timing to an incredulous investor?
You have a few options here, and how you play them has an enormous impact on how your pitch will be received. First, you need to thoroughly explore what other competitors are on the market. Ideally, you’ll have a few; too many, and you’ll be seen as too late, and too few, and you’ll be seen as too early. Next, back up all your points with research — why do you believe people are ready for this? What evidence is there to support your claims? Finally, tie everything back to numbers. What are the industry projections for the year? What market share are you dealing with?
Also, keep in mind that not all investors look for the same things. You’ll find the need to tweak your pitch for other factors based on who you’re presenting to. Also, always be well-researched and ready to address any concerns your potential investors may come up with. The better prepared and well-rounded you are, the more likely you’ll be to succeed.
Feature image: CafeCredit.com via Flickr.
