Think Like an Investor to Build Your Business

Whether your small business is brand-new, has big growth aspirations, or looking for stability, it can benefit by understanding how investors think. Venture capitalists are attracted to entrepreneurs and business leaders that offer a unique business proposition and create value. They’re willing to take on risks for substantial upside. If your business appeals to VCs, you’ve got something worth betting on, so here are a few principles to master:

Win based on contrarian thinking

The fundamental business decisions you make, from location, hiring and partners, ultimately help you deliver value to customers. Operating with contrarian business models, products, services, and value propositions gives you the opportunity for less competition. You can’t beat the crowd if you’re part of it, and you can’t deliver unique experiences if you’re delivering common experiences. Be contrarian by developing a willingness to do the work required to successfully take on risks. Greater risks can lead to greater rewards.

Win the support of venture capitalists

Venture capitalists are interested in talking with companies with unique business models. Investors play the numbers; they can afford to have more losses than wins if the wins offer major upside. What’s the upside to your best ideas if everything goes according to plan? Are you tapping into hidden consumer demands? Are you providing demonstrable value? Are your customers excited about what you have to offer? Would it be difficult for them to replace the value you offer? These are the questions you’ll need to answer affirmatively to appeal to venture capitalists for funding.

Know the competitive field

Entrepreneurs who lead their businesses to market domination are nearly always experts in the competitive field. They know each of their competitors’ strengths and weaknesses, and that knowledge helps them create effective points of differentiation. Use graphs and grids to plot where each of your competitors stands, relative to your business. Be sure you’re not operating in areas of competitive density. If you truly stand out, your business has greater appeal for mergers, acquisitions, investments, and partnerships. Key points VCs look for.

Master the investor pitch

How concisely are you able to explain your vision? Even if you aren’t currently looking for investment capital, you should be able to speak convincingly about the value of your brand. Mastering your “investor pitch” is important when speaking to potential hires, advisors, and partners.

Go for hiring big scores

Small businesses that make it big usually attribute their early successes to a “hell-yes” approach to hiring. Instead of finding candidates who check all of the competency boxes without apparent weaknesses, go for the potential superstar! These candidates can solve major problems or deliver in ways that others can’t. Candidates with high ceilings, rather than high floors, allow you to develop areas of strength and competitive points of differentiation.

Swing for power, not batting average

Imagine pitching your business to 10venture capitalists. Do you want to offer a solid investment resulting in a consensus? Or do you want to appeal to a minority of investors? If you’re thinking like an investor, you would rather excite the visionaries that ask, “What would happen if your best ideas work?” This isn’t to say every business leader should focus on maximizing upside over avoiding risks, but it is a useful analogy.

Partner creatively

In a recent post, we offered 3 Reasons Your Business Needs Strategic Partnerships and 3 Ways to Form Them. The most impactful partnerships come from areas of complementary strengths. They also can be traced to levels of innovation that reflect well on your visionary qualities. Unique partnerships provide colossal upside. Think outside of the “usual suspects” and find creative avenues of exploration in partnerships.

‘What if it works?’ shouldn’t be the primary question you ask as a business leader. But it should be a question you consider when you’re in growth mode, especially if you want to appeal to investors.