The only recipe for your first meeting with an investor

The first step to closing a deal with an investor

  1. When an investor comes forward, your only goal is to schedule a call (using Calendly or similar planning software) with her/him. In the same email, you include the pitch deck, and you tell the investor that the following will be discussed during your first call.
    • Give the investor a basic understanding of the deal dynamics (cap table, what do you want, investment process).
    • Give the investor a high level understanding of the business model (% recurring revenue, fully loaded growth model), and trading (run rate revenue and profitability).
    • The goal is to assess if (i) there is a fit between the investor and your company and (ii) you both are aligned on pricing and structure.
  2. Investors are not scientists, so you need to explain in one simple sentence (about five words) what you do.
  3. Investors have seen it all; each year they go through hundreds of pitches and hear about thousands of concepts. The fact that you were invited to an in-person meeting indicates that you are taking a novel approach or doing something fresh. Learn what it is. The meeting would begin with my asking, “Before we get started, can I ask what specifically caught your eye?” You use that as your hook for the meeting.
  4. Understanding what the potential investor wants to invest in is crucial. Ask them about the past investments they made that performed incredibly well. Align your story to their expectations.
  5. You must demonstrate how the investor’s money will be returned. Remember, it is not your money that is at stake, but his/hers. Also demonstrate that you are a unicorn and appeal to his fear of missing out.
  6. The investor, and what you can offer him, are the focus of the meeting, not you.

Valuation of your company

Founders tend to overestimate the value of their company. Here is a way to present the investor with a realistic estimate.

The development stage valuation approach is often used by angel investors and venture capital firms to quickly come up with a rough-and-ready range of company value. Such rule of thumb values are typically set by the investors, depending on the venture’s stage of commercial development. The further the company has progressed along the development pathway, the lower the company’s risk and the higher its value. A valuation-by-stage model looks like this:

Estimated Company ValueStage of Development
€ 250.000 – € 500.000Has an exciting business idea or business plan
€ 500.000 – €1 millionHas a strong management team in place to execute on the plan
€1 million – €2 millionHas a final product or technology prototype
€2 million – €5 millionHas strategic alliances or partners, or signs of a customer base
€5 million and upHas clear signs of revenue growth and obvious pathway to profitability
Source: Investopedia

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