Starting a new business is tough and many fledgling companies need financial assistance to put their services or products out there. If you’re not willing to apply for a loan, you can always opt to find an investor or a group of investors who will kick-start your project. Here’s a brief rundown of what you should know before you start searching.
Before you start your search, it is important to determine whether your company is readyfor investments.
You should postpone the search for investors if your company is still at a very early stage of development. However, if you have a proof-of-concept, you can start your search.
If your company doesn’t qualify for loans or you are reluctant to take risks withdebt, personal loans, and credit cards, you should consider finding an investor.
On the other hand, if you’re not in dire need of money, you shouldn’t start looking for investors yet. Also, if you’re not ready to give someone partial ownership of your company or let them influence its development, finding an investor might be a bad idea.
Possible investors include organizations and individuals focused on financing and guiding companies in their early stages of development. It is worth noting that many of them further specialize in certain types of companies, industries or business models.
Usual types of investors include “friends and family,” angel investors andseed or early-stage venture capital investment funds. Some investors like to work alone, but you might also run into a fair number of groups and syndicates.
You should expect to get less funding from individual investors than seed or venture capital funds. Typically, very early stage business investments are in the five or perhaps six-figure figure region, rarely going into the seven-figure range. You may experience less input and involvement from individual investors than a venture capital funds.
Now that you know who your potential investors are, it is time to work out your strategy. In the following sections, we’ll discuss some of the most common ways of getting in touch with them.
Networking is essential for everyone intent on making it in the business arena. Good networking skills can land you a promotion, a better job, and even an investor for your early-stage company.
Start connecting with the people you know and build from there. There is a chance that someone could introduce you to a potential investor.
Additionally, you might want to comb through accelerator and incubator programs in your area and online. These types of organization have become easier to find and get in touch with in recent years.
Finally, you can always try with the SBDC (Small Business Development Corporation) or the chamber of commerce in your area.
In case you’ve just entered the business arena and don’t have a developed network, you can always attend summits and conferences. That way, you’ll get a chance to mingle and build your network, as well as search for investors for your company.
Though it might seem contradictory, the key here is to prioritize building solid relationships with investors. You should take time to know them and find out what types of businesses they are interested in, what they expect from the companies they invest in, and how to genuinely catch their interest.
If someone in your network knows a small business investor interested in the type of business you’re doing, your best bet is to convince them to secure you a one-on-one meeting with the said investor.
A personal recommendation from a trusted contact is the best type of recommendation. You’re far more likely to get heard and given a chance if someone close to the investor can recommend you.
If you don’t have any close business associates, you can try getting in touch through other credible and reputable people. Experienced accountants and attorneysthat specialize in start-up companies come to mind.
You have two options here. First, you should utilize all your social platform channels and profiles to advertise your business. Make sure to maximize your outreach and don’t be shy about the fact that you’re looking for an investor. Before you do this, however, you should consult with an experienced attorney about the rules concerning this method of fundraising under applicable securities laws .
Next, you can try browsing the investment platforms. There are many such places around the web; they’re all differently structured and cater to different types of investors and businesses. Shop around and see what platform fits you and your business best. Depending on the platform, you might get a single investor or an entire syndicate.
Finally, you can always try with a direct approach. Prepare your pitch as best as you can, pick the potential investors you’d like to land a meeting with, and hope for the best.
In all fairness, this approach is less likely to bear fruit than the above-mentioned methods, but it is certainly worth a shot if you’re confident that you’ve got a good thing going on.
Arm yourself with patience and don’t let the rejections discourage you. Finally, be ready to use all channels at your disposal – email, social networks, and even phone.
Finding funds for a new company is not an easy task, by any standard. It can take quite some time and there can be many obstacles along the way.
Luckily, there are numerous strategies you can employ to get in touch with a potential investor or a group of investors. You can pick your favorite or opt for a combined approach. Whatever you choose, you should arm yourself with patience and perseverance.
Always make sure that the methods you use to find investors, make offers to them and sell them securities do not violate securities laws. If you violate securities laws in making offers or selling shares or debt in your business, you could create significant problems in raising funds and expose yourself to personal liability.