Starting your business is always a challenging task. You need to create your network, develop a business plan, identify the resources needed, time to reach your goals, find the right people for the team, and, of course, find the money.
And this task seems to be the hardest part. Most owners don’t know where to start when it comes to finding investment for business growth. In addition, they don’t know how to pitch the startup idea to investors to win the battle among many other startups.
Even though it has always been hard to find investment, the modern world offers more opportunities for startup owners and supports more ideas. Learning some proven ways can help you accomplish this goal. We created this article to showcase steps on how to find investors and some tips for networking with potential investors. Let’s get to it.
How To Find Investors For A Startup
Ask Family And Friends
The first thing you need to do is to ask family and friends to get investments. Even though some believe it won’t work, 30% of successful startups have been realized thanks to their relativities.
This option is safer and more cost-effective since your close people are more likely to offer you the money in more advantageous conditions than the bank or a professional investor. It is vital to decide whether you will ask them for a loan or an actual investment, which means you will need to return them some portion of your profit.
Even though asking friends or family to invest in your business may seem an easy way to secure funds, we highly recommend you treat them like you will treat real investors. That means you need to show them your solid business plan, explain the risks associated with them, and so on.
Consider Equity Financing Sources
Equity financing is a term used to describe the investment option which involves receiving funding from an outside party in exchange for a share of your organization. Even though the idea of giving up a part of the organization to someone else may not seem appealing at the startup phase, it is one of the simplest and quickest ways to raise money and use it to get your products on the market.
Fortunately, there are many places you can find this investment model, like investment firms, online crowd-funding websites, incubators, and online groups.
Apply For A Small Business Administration Loan
The Small Business Administration refers to a government agency that was designed with the goal of helping small businesses. Even though they don’t provide loans, they are mainly used by startup owners to connect you to approved lenders and may guarantee the loan for you. This means that the lending institution usually gives owners much better repayment terms and interest rates.
This agency not only connects you with lenders but can also help you gain information on how to better develop your business, which credit control software to use, and sharing tips on launching and growing your startup business.
Find Private Investors
The last but most common way for startups to get funded is through private investors. These are people who look for exciting business ideas they want to invest in, usually in exchange for equity in the respective companies. Now you can seek help from two groups of private investors, including:
These are investors providing startups with capital in exchange for various privileges, including an equity stake, a place on the company’s board of directors, as well as some portion of the company’s future profits. These investors are usually not individuals; they often venture capital firms that tend to choose startup organizations with higher than average growth potential.
Angel investors usually work in person rather than in a group. These People usually have large amounts of disposable funds and are looking for promising startups to invest in, in exchange for equity in most cases. In contrast to venture capitalists who invest to generate a significant profit from their investment, angel investors usually focus on the startup’s long-term future.
Tips For Networking With Investors
We also recommend you consider the following tips when networking with investors:
Have A Solid Business Plan
If you are going to network with real investors, you should always have a solid business plan. That is because investors always check how detailed and realistic the business plan is when deciding whether to invest in it or not. You can fail the pitch if you don’t have clear goals and expectations from your startup.
A solid business plan should clearly outline what your organization is going to achieve, how you want to achieve your goals, what you need for these goals, and what your timeframe is.
Be Prepared To Refuse An Offer
Even though you need investment, you will likely get some poor offers that may damage your business in the long term. Before networking with potential investors, it is also vital to first identify what investment options you can accept and why.
Although securing an investor is a key step in the life of a startup, you should first set clear boundaries regarding how much you will be able to give the investors, whether you want to share the share of the company, and what options don’t meet your criteria.
Have A Quick Pitch Ready
Pitching your idea is essential. Even though you may be invited to a meeting and have time to prepare your pitch, it can happen unexpectedly. So when starting networking with potential investors, it is always best to have a 30-second speech ready.
Getting funded is the dream of almost every startup. While it has always been a hard part of the business, now there are many options that allow any startup owner to find the perfect investor for them. Knowing where to find investors and how to connect with them to achieve success makes the life of a startup owner easier.