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5 Key Arguments to Convince Investors of Your Automotive Project

Dietmar Kleindienst
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3 min reading time

This article highlights 5 key arguments paramount for anyone who seeks to find sponsors and to convince investors willing to put money into their automotive vision. In addition, it will also explain the importance of communicating those arguments in both a concise and comprehensive way.

TABLE OF CONTENTS:
> Potential investors seek potential opportunities
> Convince investors with a USP that captivates
> Convince investors with comprehensive knowledge about the market
> Convince investors with a solid business case
> Convince investors with a well-conceptualised marketing and sales strategies
> Convince investors with conficende and passion
> Pack everything into the perfect pitch deck
> What’s next?

Download Image 8 Things Investors Want to See; Whitepaper; Magna

Finding and convincing investors will be a task every new entrant will have to meet in their development process at some point.

seven wooden sticks showing arguments that help to convince investors about an automotive startup, vor example: regulation, Guideline, Compliance, etc.

How To Convince Investors Over in The First Place?

Why should someone invest in your automotive startup? Potential investors seek potential opportunities. Most investors willing to invest in an automotive startup  and to cooperate with new entrants and first-time entrepreneurs will do so with a certain risk factor accredited for. From the perspective of those venture capitalists, supporting a completely new entity within the vehicle market provides a greater risk of net losses than simply funneling money into already well-established players.

However, more risks also equal higher revenue potential. It is exactly this dichtonomy between risk and revenue where a new entrant has to strike. They need to convince investors, that their vision possesses huge growth potential while they themselves meet all expectations for a safe, stable and on-time development process. For creating this impression, the following 5 things are indispensable.

1: Convince Investors With a USP that Captivates

Every new product on the market needs to fulfill one central prerequisite: something that makes it distinct from other, similar products. It needs to offer its target audience an argument on why they should consider buying this product over other products. And it needs to convince an investor with something unique. Especially when it's about investing in an automotive startup.

This trait is the Unique Selling Proposition, or USP, and there is no successful product or brand strategy that can function without one.

In essence, the USP can be described as the best (or even only) solution to the most important problem of its target audience. Products always exist in order to satisfy a certain customer need or to solve a specific problem. Potential investors in your automotive startup will ask you about your USP.

Of course, this problem can be fairly complex. For example, any vehicle can transport people from A to B. But which vehicle can do so the fastest? Which one can offer the most security? And which one strikes the balance between these two factors the best?In addition, the problem the product solves also needs a known audience for which this problem is sufficiently important.

The primary target audience of SUVs likely doesn’t need a vehicle that performs particularly well in city traffic. Likewise, sports cars usually don’t need to perform well off-road, as their target audience has priorities diametrically positioned to the key traits of all-terrain vehicles (ATVs) or sports utility vehicles (SUVs).

Simply put: an USP needs to address a relevant problem for its target audience and show it the ideal solution for it.

In addition to its general importance to the product there are two reasons on why a good USP is particularly important for convincing investors. First, the USP immediately shows not only the customer’s benefit but also the benefit for the investor:

  • Why does the market need this product?
  • Why does it promise success in the market?
  • Whom is it addressing and what elevates it from the competition?
  • And of course: What does the investor get out of it?

And second, it shows the investor in an automotiv startup, whether both the project and the new entrant can stay afloat. The USP therefore is of great importance when you want to convince investors of your EV project. It already implies whether or not a team operates focused and is able to determine current trends, demands and possibilities on the market.

A vehicle generating solar energy via solar panels on its roof may sound like a feasible and sustainable idea at first, but is anything but technologically realizable. Likewise, a vehicle whose USP simply consists of “going faster than other cars” won’t convince any investor by itself.

So ask yourself: What's my project's USP to convine investors in my automotive startup?

2: Convince Investors With Comprehensive Knowledge about the Market

If you want to convince investors you need perfekt knowledge about the EV market. Investors themselves may not always be professionals within the vehicle market. However they do expect their potential business partners to have both the knowledge and the data about all aspects of the product itself and the environment it is released in.

A general knowledge about the vehicle market itself as well as the specific target market of the vehicle, including competitors, customers and developments, are expected. Also, the new entrant should possess a clear picture about the future development process and its risks as well as a well-conceptualised strategy to overcome them.

New entrants who want to convince investors to invest in their automotive startup must be able to prove their credibility as vehicle manufacturers. Especially, if the investor themselves originated from the vehicle market.

In practice, most new entrants don’t have the necessary infrastructure or resources necessary to conduct a large technical feasibility study on their own to convince investors.

Thus, in order to meet this prerequisite, the new entrant can (and should) team up with a capable technical partner who supports them in creating said technical foundation.

This has an additional beneficial effect as well, as the cooperation with a well-known industry name provides the new entrant and their vision an additional level of credibility.

It’s more likely to win investors over after all, if a company with profound technical knowledge, infrastructure and the experience to determine the value of an idea, teams up with the new entrant who is currently asking for the investor’s financial support.

3: Convince Investors With a Solid Business Case

Naturally, the question for the financial requirements and the general schedule of the project are amongst those that the investor will ask about. After all, the business case is the segment of the pitch that directly highlights, such as how much money the new entrant is asking the stakeholder for to invest in his automotive startup.

Included in the business case are also the timing plan, which shows the expected development progress and its respective costs at each point of the project, as well as the financing plan, which explains how the new entrant wants to raise the necessary funds. Therefore, both should be formulated as completely as possible in order to convince investors.

As a reminder: a project as large as developing a vehicle comes with a respective demand for resources, both in terms of money and time. Thus, such a project will in most cases require the search for multiple investors, each contributing a certain part of the total money required.

Additionally, investors will also scale their contributions according to the project’s progress. Which means that a new entrant also has to maintain credibility as a reliable partner towards investors. Of course, if their business case and timing plan are constructed with the necessary insights for vehicle development in mind, it will generally be easier to do so.

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Back to all Articles Dietmar Kleindienst

Dietmar Kleindienst is Director of Key Account & Business Development for North America Region and new entrants on a global base of Magna Steyr since 2021. He joined Magna in 1994, and before he joined the Sales & Marketing organization in 2018, Kleindienst held several operational and management positions in Supply Chain Management, Manufacturing Engineering and Program Management in Graz, Austria and within abroad assignments in North America. He holds a degree in Industrial Logistics.

Guide for Entering a New Vehicle Market | Magna

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