This article is written by Brian Malika, a Contributor Author at Startup Istanbul.
First of all, you don’t want to settle for a deal that is such a rip-off just because your innovative idea is fresh and new hence you feel desperate build a partnership profile out there in the market.
Remember that as long as you believe in your innovative idea and have done your homework right, you do deserve a meaningful opportunity and it does n’t matter whether you have the experience of doing that type of business or not.
Therefore, it’s important that you do background research on the market value of your innovative idea by comparing previous investment offers on ideas that relate to yours . Once you have a market value that is equivalent to your start-up idea, then you use that as a bargaining standard with an investor.
Do not accept to go so low in the negotiations with your investor just because you feel it’s your first time as a start-up founder. By the mere fact that you have an investor on board who wants to make an offer to you it simply means your innovative idea has the potential to grow.
(2.) Present a market plan in your pitch that shows how your start-up will penetrate the desired market with ease thus assuring the investor at hand that their money will appreciate by circulating to meet needs of the target customers through your innovative idea. Do not just state that we target such and such a market if our idea is well funded, such a narrative is not convincing for anyone to put their money in an initiative. But instead, go ahead and show the dynamics of your target market in every manner possible and relate the same to your innovative idea. And finally, justify what the investor money will be doing in the target market by showcasing how it will be spent and the value in return. When you implement this strategy, you have high chances of receiving all the money you asked from the investor.
(3.) Do not just tell the potential investor that we target to meet the needs of target customer X and Y. Such a language is not a good negotiating tool that would yield you the investor results which you desire. Instead, you should tell your target investor how you will satisfy the needs of a certain niche of customers and again go further to explain the ability of such a customer niche to pay for the product or service that your new start-up is introducing in the market.
Every investor before they even come to that negotiating table already knows that you will obviously have a certain target market. But what every employer is not certain is usually on the ability for a particular target customer to pay for the goods and services that are being introduced by a start-up that is funding.
If you can explain the ability of your target customer to pay for your goods or services being introduced through your start-up, then you are in good standing to negotiate for a fair deal with an investor.
(4.) Again , it will be a big minus if your pitching to an investor and everything is going on pretty well until the time they ask you a question about your innovative idea and then you go blank with no idea on what to answer. Being able to defend your pitch to an investor does send signals that maybe such a start-up founder is on a gambling initiative.
Therefore, always do enough research on every angle of your start-up’s innovative idea and also do a mock pitch before experts in the field of business your taking way before you meet the real investor. The will ensure that yo drastically reduce any chances of not being able to answer a question from an investor.
(5.) Most importantly, ensure that whatever deal you are offered by the investor, you shouldn’t be so quick to append your signature on it. Calm down the excitement and ask for some time to think and consult about it. Later on, you might realize that if you had been too quick to sign an investment partnership maybe, you might have lost a chance to negotiate for one or more accommodations which usually come with any type of investment.
Again, do not quickly accept the offer of getting a job opportunity with your investor so that you can implement your start-up innovative idea as an employee and as such take time to think before signing any agreement.
If a job with your investor works for your better than a fund while implementing your innovative idea then that is perfectly ok but still, take some time to think about your decision before signing the agreement