How to Find Investors for a New Business
For any new business setting, capital is needed and relevant investors can do wonders to ensure the success of the business. Whether it is fresh start-up to be launched or existing business getting expanded, funds are one critical factor. The guide informs about searching for different investors to any newly found venture; prepares one for an investor meeting and funding.
1.Understanding the Different Types of Investors
Before asking about and searching for the right potential investors, one must know in detail the various types of investors available:
a) Angel Investors
These are individuals who put their money into small start-up firms against convertible securities or ownership equity. Investment by angels is mostly upfront for the very early age companies from where also such companies could avail industry experience and contacts very much useful.
b) Venture Capitalists (VCs)
Professional investors called risk capitalists lend start-up loans typically to firms with high promises of development, in exchange for which they often seek an above-average return on their investment, often demanding some form of company ownership.
c) Crowdfunding Investors
Crowdfunding brings together relatively small sums from a vast pool of people via some platforms such as Kickstarter, Indiegogo, or GoFundMe. An equity crowdfunding platform such as SeedInvest or Crowdcube allows backers to invest in exchange for shares from the company.
d) Private Equity Investors
Private equity investors typically provide funds for matured companies looking to grow or restructure. Practically, these investors acquire significant interest in the firm while controlling the overall process for management decisions.
e) Bank Loans and Government Grants
Although often not classified as investors, banks and government agencies are traditional sources of different funding options provided under loans and grants to small businesses. Such alternative avenues of funds best suit entrepreneurs who prefer debt to equity financing for their business.
2. Preparing Your Business for Investors
Be prepared to approach your investors. Invest in getting your company to investment readiness:
a) Develop a Solid Business Plan
A solid business plan, with the specifics below, is what the investor looks for:
Business model
Market research and industry analysis
Financial projections
Revenue streams
Competitive advantage
b) Create a Compelling Pitch Deck
A solid pitch deck detailed in writing briefly covers every major area of the business at a glance. The following can usually be included:
Problem and solution
Market opportunity
Business model
Traction and milestones
Financial overview
Team introduction
c) Build a Strong Online Presence
Future investors will dig information about those companies in which they are thinking about investing. So your professional website; the social networking accounts must be active with maximum positive reviews from customers.
3. Where to Find Investors
a) Networking Events and Startup Conferences
There are great opportunities to meet potential investors by networking and attending startup events, industry conferences, and meetups. Examples of such events are TechCrunch Disrupt, Web Summit, and Startup Grind, where entrepreneurs and investors meet then.
b) Angel Investor Networks
An organization like AngelList, Angel Investment Network, and Golden Seeds helps connect angel investors with startups. Being stationed in these platforms will increase the visibility and access to funding opportunities.
c) Venture Capital Firms
Under high growth potential for your company, you might consider contacting venture capital firms. Some popular examples of investment companies include Accel Partners, founders Anderson Horowitz, and Sequoia Capital.
d) Crowdfunding Platforms
Crowdfunding is another option to get the required capital while validating the business idea. Some currently popular platforms are:
Kickstarter & Indiegogo (for product-based businesses)
Equity Crowdfunding (SeedInvest, Crowdcube, StartEngine)
Debt Crowdfunding (Funding Circle, Kiva)
e) Startup Incubators and Accelerators
Also called incubators or accelerators, these are institutions which speed the growth of starting companies by giving them funding, mentoring, or networks. Examples are some of the elite hands-on programs like:
Y Combinator
500 Startups
Techstars
f) LinkedIn and Online Networking
Many investors actively seek investment opportunities on LinkedIn. Engage with investor groups, share business updates, and connect with potential backers directly.
4. How to Approach Investors
a) Personalize Your Pitch
Avoid sending generic messages. Research potential investors and tailor your pitch to their investment interests.
b) Leverage Warm Introductions
It's more probable that you will score an appointment with an investor when you've got a personal reference-from someone in common.Identify your common contacts through your professional network.
c) Demonstrate Business Traction
Investors prefer businesses with proven traction. Highlight metrics such as:
Revenue growth
Customer base expansion
Partnerships and endorsements
d) Be Transparent About Risks
It is very important to maintain honesty when pitching to investors. Acknowledge the different flights of risks that can arise, along with a credible plan to mitigate them.
5. Dealing with Investments
a) Understand Valuation and Equity
Investors will assess your business concerning its income, market potential, and growth chances. Make sure you have a fair valuation before negotiating on equity.
b) Choose the Right Investment Terms
Carefully review investment terms, including:
Equity percentage
Board involvement
Exit strategies
c) Hire Legal Counsel
Consult with a lawyer as contracts need to be reviewed in order to come up with favorable investment terms.
6. Developing Long-Term Connections with Investors
a) Keep Investors Updated
Regularly share progress reports and key business developments with investors.
b) Deliver on Promises
Meeting milestones builds investor confidence and increases chances of securing additional funding.
c) Maintain Transparency
If adversities arise, let us communicate openly with investors and discuss the choices.
Conclusion
It takes strategy, commitment and preparation to get investors into your new business. Find multiple funding sources for your business, develop an attractive pitch and build your networks to secure the investments needed to develop your business. Whether you turn to angel investors or get your money from venture capital, crowdfunding, or accelerators, the most important part of that process is matching with people who invest in your future vision.