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?
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.
4: Convince Investors With a Well-Conceptualised Marketing and Sales Strategie
While the USP may highlight the key problem of the target audience and provide a solution to it, it still needs to be converted into actual measures and strategies in order to close the gap between the vehicle and its future customers. This is where the marketing and sales strategies come into play when convincing investors.
In general, both the marketing and the sales strategy serve a similar role: They are the core components highlighting the audience’s journey through the sales funnel in order to turn from a target group to prospective customers and then actual customers.
The marketing strategy defines the overall direction of the advertising efforts and sets out the key engagement and communication measures in order to evoke interest into the product and move an audience into the vicinity of potential customership.
The sales strategy then continues at this stage and defines the direct sales efforts towards the target audience as well as handling the set-up of a sales model and after sales. In short, a marketing strategy establishes the direction of the brand communication, whereas a sales strategy sells the actual product.
Investors naturally also expect a new entrant to have both of those strategies formulated and planned out, as they are directly responsible for establishing, maintaining and expanding the brand’s customer base out of its general audience. So be sure to have both strategies worked out well to convince investors of your automotive startup.
Consequently, they are the primary measurements driving the brand’s earnings performance. Simply put, a business cannot grow without marketing and sales strategies in place.
Convince Investors With Confidence in Your Abilities and Passion for Your Idea
Often, the questions behind vehicle development revolve around technical, financial or organizational issues, such as monetary requirements or potential manufacturing partners.
However, it is just as important to consider how a vehicle should also be viewed as a personal project by those involved. The emotional component of various people from different fields of expertise working together to realize a shared vision is probably as old as time itself.
Vehicles in particular are very often a passion project of not only their conceptual originator but also of those people who take part in its realization.
Naturally, investors will also in many cases share a passion or at least an interest for the project beyond financial profits. Or rather, they potentially will do so if the project they are presented manages to evoke this passion. It is the job of the new entrant to captivate potential investors with a vision that promises more than „just“ swift development time and large profit margins.
They need to present the vision behind the vehicle, the emotional incentive of their vision, the passion behind their project to convince investors.
- What idea does this vehicle represent?
- Why does this dream deserve to be realized?
Of course, such a commitment can only be communicated by someone who themselves steadfastly believes in their idea’s validity as well as their own abilities to bring it to realization.
Passion and confidence may not be easily quantifiable, but they still serve a large role in convincing investors that this specific vehicle vision is worth their time, resources and attention.
Pack Everything into the Perfect Pitch Deck in Order to Convince Investors
Once those five qualities have been sufficiently analyzed and established, the next step is to figure out on how they can be best conveyed to investors. Usually, the new entrant will meet in person with the investor in order to present their vision to them and to convince them of a cooperation.
In addition, investors will also expect the new entrant to provide the highlights of their project plan in a concise and convincing manner via a pitch deck.
The pitch deck fulfills a vital role in the search for angel investors in particular: it provides a concise but comprehensive snapshot of the new entrant’s vision for the investor to get familiar with and refer to afterwards.
The information found in a pitch deck should in general always include all of the aforementioned qualities in addition to other key information about the project. Thus, the pitch deck should ideally include:
- The USP of the product (problem - solution)
- Information about the target market, competitors and potential/established project partners
- The business plan, including the timing and financial plans
- The marketing and sales strategy as well as an assessment of the expected revenues and when they are estimated to be in the black
- Information about your EV startup and your team’s qualifications and functions
A small reminder at this point: Not all investors are brought into the project via a „conventional“ sales pitch. In many cases, new entrants turn towards investment banks, which serve as mediators between a newly established business and investors.
This also means that investors will gain their first impression of a new entrant and their vision via the pitch deck. This fact makes it even more important that the deck can convince viewers as a standalone document.
You Managed to Convince Investors of Your EV Startup? So What's Next?
These 5 qualities are not exclusively linked to success in the vehicle market, nor are they the only necessary qualities to win over investors. Growing a business from the ground up is always an extensive endeavor – it just so happens that it is particularly demanding for a market as contested and technically complicated as the vehicle market.
But as venture capitalists might argue, success is always a gamble. And in order to keep the upper hand, both knowledge and character are indispensable for future success.