How to Present an Internet Business Idea to an Investor
Internet business is growing, even in the current down economy. According to the U.S. Census Bureau, U.S. retail e-commerce businesses generated $32.4 billion in revenues during the second quarter of 2009, an increase of 2.2 percent from the previous quarter. Internet businesses generally have low start-up costs and can begin as part-time enterprises, allowing the entrepreneur to keep his day job until the business generates a profit.
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Instructions
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Identify potential investors to approach. Commonly called "angel" investors, individuals with money provide start-up capital to small businesses, particularly online enterprises, in exchange for ownership of a percentage of the business. In some cases, investors form networks and combine their funds to invest in multiple opportunities.
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Compile a detailed business plan to present to potential investors. The plan should contain an analysis of the size and value of your target market, competitors in the marketplace and your plans for obtaining a share of the market. In the plan, outline the products and services your Internet business will offer, price points, projected profit margins and your marketing strategy.
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Build an online prototype that showcases your business. Whether your Internet business is a portal that offers digital products, a content site that sells advertising, or an e-commerce business that handles orders for physical products, you must demonstrate to the investor that you have the expertise to operate the business. And you must show him how it will work. Make sure your site is professional and attractive and that all the functions operate as they should without errors.
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Compile a proposal to present your idea to investor. This should include a description of the Internet business, your business plan and links to your prototype, plus resumes for yourself and any other partners or managers. Include your budget and financial projections, the amount of start-up capital you require and how you intend to use the money.
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Prepare a draft investment contract for the potential investor. This should outline the timeframe of the investment, the way in which you wish to receive the funds, the shares or returns you're offering the investor and the financial value of those returns. Have the contract checked by a lawyer before you send it to a potential investor, then again if the investor proposes any changes to the terms and conditions.
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Approach the potential investors you identified with your proposal and accompanying documents. You can do this in person or via the Internet using meeting software or video, depending on the location of the investor. Present your Internet business idea professionally and allow the investor time to consider your proposal, review your business plan and prototype and ask any questions she may have.
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Tips & Warnings
Encapsulate these points in a one page executive summary
A good business plan will be in the form of a spreadsheet with all assumptions clearly stated and no obvious errors.
Do not attempt to show how you can beat the competition. No one knows and you will be asked to show how the next person won't beat you. Don't fall into that trap.
Don't approach investors too early (i.e. with an idea only). Be prepared to put in your time and even some money to get to the point where an investor might be interested.
References
- U.S. Census Bureau News: Quarterly Retail E-Commerce Sales
- Entrepreneur: Starting an Online Business in a Down Economy
- Go 4 Funding: What are Angel Investors?
- U.S. Small Business Administration: Essential Elements of a Good Business Plan
- eMarketing Man.com: Starting an Internet Business
- Innogest: How to Submit an Investment Proposal
Resources
- Photo Credit Creatas Images/Creatas/Getty Images
