Chapter Nine - risk mitigation and how to make it easy for investors to say yes
by Joe · 48 things on Twos
- Battles are often won by reducing the downside risk
- As investors evaluate your pitch they are looking for you to mitigate against
- Product Risk
- Is the product user friendly?
- Will we be able to offer it at a price point that will cover costs and attract a majority of customers in our target market?
- Market Risk
- 42% of startups fail for lack of a product need
- Is your product really something that customers want/need
- It it enough of a difference that people will pay for it?
- Detailed market research
- Organic growth through word of mouth referrals
- Management Risk/Execution Risk
- Inexperience of the management team
- Can we execute on the plan
- Knowing the team can deliver and allowing that to come through the meeting
- Financial Risk
- Running out of cash
- Do we have enough until we receive investor funding
- Could take 6-9 months to close an investor round
- Vulnerable companies are unappealing to investors
- Competitive Risk
- What are we doing to gain market share
- Do we have barriers to entry?
- Do we have a database of customers that will keep us from being out competed?
- Do we have competitors with deep pockets that can emulate our product?
- First to market is no longer insurmountable
- First to market fit is now the better solution
- Mitigate through patents, contracts with companies already in place, and loyal customers.
- Be prepared to answer questions about risks
- Five questions you will need to answer for investors to say yes
- How to read investors at the meeting?
- How can you tell you made the sale?
- Body language
- Interrupting to ask questions is good
- If investor does not propose next steps, then we need to do that
- Any response other than 'Yes, let's set a meeting' is not good
- If no, move on
- If they are willing to introduce us to other people in their network then it means they believe in the viability
- If they like what we are selling they will be eager to introduce us to their peers
- Dealing with rejections
- Do not take it personally
- When turned down
- Ask for more referrals and if they are willing to introduce us
- Ask why and how we can improve our pitch
- Every no is another step towards a yes
- The more people we get in front of, the more nos we will hear, but that is only getting us closer to the yes
- Create a monthly investor mailing list to let them know about your progress
- All it takes is one yes for that second meeting