"Do unto others as you would have them do unto you," is commonly known as "The Golden Rule." This statement is also "The Golden Rule" in the context of fundraising yet it is often forgotten; it is very useful in marketing your investment opportunity to potential investors.
Asking for investments from total strangers for your business idea is one of the most difficult tasks an entrepreneur must master. However, when broken into smaller steps, it can be mastered by many. Here is how.
Step 1: Do your homework!
If we reverse engineer the process, the first step is to identify investors who have a genuine interest in what you are doing (previous investments in the industry, previous exits or a personal connection) and then create a target list.
Step 2: Start building your network to reach your target audience.
Next step is to create a warm connection and introduction through a shared contact, or propose an inviting and neutral environment to meet your target audience. There are many digital tools that have direct access to your desired investors, so learn a little bit about them to find the best method to connect.
Step 3: Instead of asking, give something first.
You have a list of potential investors that you have identified and did some research on how to connect. You met them under the best circumstances. Now what? Well, you need to start building a personal rapport with them, and the best way to befriend a new person is to start by giving.
To be clear, I don't mean for you to spend thousands of dollars to impress an investor (that will surely backfire), but to find a way to bring value to what is important to them. Help with their favorite charity. Invite them to an event they may find interesting. Connect them with someone who can be a resource to them. This initial approach will set the tone of the relationship — remember we only get a single chance at making a first impression.
Step 4: Introduce your business to them. Not the investment opportunity, not the ask, but the business!
The best investors are often your potential customers. When presenting your business to an investor, forget that you are talking to someone who can contribute financially and pitch them the idea and essence of it. Share your excitement about solving the problem at hand and ask them if they'd be interested in becoming customers. Even if they may not be your ideal clients, you will establish yourself as someone driven to sell and open to suggestions.
When prompted, a potential customer will give you feedback about why they will and won't consider your product/service. Once you understand the interest level of your potential investor, make the necessary adjustments (as needed) and try to close them as a customer first. Only mention the opportunity to invest when that conversation comes to a conclusion.
Step 5 and on: Follow up. Be persistent, but polite.
Very few investors will make an investment decision on the spot. Many relationships take years to build. Timing is everything. If you never forget these simple rules, you can build a network robust enough to fund any future project you may be involved with.
Finally, try to crawl before you walk and walk before you run. In the context of investor relationships, try to start with a small investment to prove yourself before you ask for a larger investment. If you are successful as an entrepreneur, money will always be available as you build your reputation as someone who returns a profit. Good luck!
– Brad Yasar – Investor, Entrepreneur, Advisor