Every coder has a dream of developing the next big app that disrupts and scales. Or a platform that redefines communication and business functions. However, one tough question arises when it’s time to get capital: How big is your idea- why should investors put their money into your proposed venture? When you enter the funding world, potential stakeholders won’t be interested in how passionate you’re about coding. They want to know if the idea is scalable, solves problems, and can earn profits. In a recent McKinsey survey, over 80% of investors admit that an interesting equity story that tells how a company creates value and grows profits over time influences their funding decisions. For a tech startup founder like you, this means translating your knowledge of the impact of high-level programming languages or other tech skills into an investment-worthy project. Ready to learn how to convince investors to see the value of your idea and fund it? Keep reading.
Prove Your Product Can Solve an Existing Problem
Can you guess how much time an investor spends reading a pitch? They spend 2-5 minutes on each story sent to them before meeting a founder that gets their attention. So, don’t waste your chance by bragging about your code quality or software architecture. State a problem in the market and how the idea you’re presenting will solve it. Talk about who the problem affects, how much time and money is lost because of it, and the number of people or businesses that could benefit from your solution. An interesting story paired with realistic data will keep your audience (investors) engaged.
For instance, if you’re developing a logistics tracking platform, don’t lead with the product. You could say, “Small fleet operators lose 20-30% of profits because of insufficient route planning. Our tracking solution eliminates this loss by automating route optimization and driver monitoring.” You could also say, “The AI-based accounting app our firm has developed cuts payroll processing time by 65%, allowing entrepreneurs to channel hours back to growth activities.” With such solution-driven statements, you can convince prospects to consider your pitch.
Build Trust with a Legal Structure
Besides the solutions your innovative platform or software can offer, investors also look for professionalism. Are you credible in the marketplace? Do you have a structure that protects future business partners from liability and double taxation, while supporting growth? You can make your tech startup legitimate by registering it as an LLC (limited liability company). You’re likely thinking, why an LLC and not a corporation or sole proprietorship? LLCs have numerous benefits that attract investors. First, it’s easy to form. True, registering your company as a limited liability involves daunting paperwork and fees. But with the guidance of registered agents, the process can be straightforward and affordable.
A registered agent will file legal documents required in your state, send annual reports, and manage a business’s digital mailbox on your company’s behalf. Some agents, like Northwest Registered Agent offer a discount link for a lower registration rate. You could use this NWRA promo, for example, which offers a 60% discount. So, instead of paying $100, you pay $39 plus state fee, and get free registered agent services for a year. Once you’re an LLC, you enjoy pass-through taxation, meaning only members are taxed and not the entity itself. This saves you from the double taxation corporations attract, where gains are taxed at the corporate level and again when shared among stakeholders. Plus, your personal assets are protected from liabilities because the business is registered as a separate entity. There’s also flexibility in management, as you can decide whether members or a hired manager runs the business.
Explain Your Revenue Model
What strategy will you apply to generate revenue or financial income once you’ve launched your tech business? In simple words, a revenue model dictates how a company sets product prices or charges customers for services to earn profits. Before coming up with a pricing list, you’ll need to consider your customer base and explain to capitalists who your target market is. Doing so helps investors visualize who you intend to sell products to and displays you’ve done thorough research on whom your innovations will serve. Next, study your competitors to know how you’ll set prices and have a competitive edge.
Your revenue model could be a pay-per-use structure, which involves a direct sale to customers without a guarantee of repeat business. For instance, a tech firm could charge for software-as-a-service (SaaS) per amount of data processed or transaction made. You could set up a subscription payment method, which allows customers to pay a monthly or an annual fee for software or platform services. Or a passive income framework like a royalty revenue model, which allows you to sell intellectual property, such as an original source code or software license you have copyrights or trademarks for. When showcasing your income-generating models, mention your wins, even small tractions can make a difference. Show interested stakeholders the sales, contracts, or customers acquired since launching a product.
Your love for coding platforms can be more than a passion project. You can transform it into a profitable business venture that offers innovative solutions to people. But only if you know how to convince investors that your idea is worth funding. This involves closing the gap between technology and visible impacts. Show how your coded product solves problems, the estimated profits it will gain, and how many people will benefit. Don’t forget to display professionalism by making your startup legal and crafting realistic revenue models.