How to Get Investors For Your Business
Some businesses are able to get off the ground without much trouble. But about 27% of businesses aren't able to get the funding they need. How can a business position itself to get the funds for a successful launch?
There are several things you can do to increase your chances. Even though it may not be easy, it's possible, especially with hard work. But you can save yourself some energy if you use the following principles and steps.
What Is an Investor?
An investor is someone who gives you money to help you start a business. In most cases, an investor expects something in return. Some expect to earn interest on money they lend you. Others expect to get a part of your business in return for their investment. Others expect to get a lump sum of money at a future date.
Every now and then, you find an investor who gives you money for free. These tend to be people you know like family members or close friends. When possible, it's always best to give the investor something in return. If the individual insists on giving you money with no strings attached, you can still find a way to say thanks.
Most investors will expect compensation for their contribution. When deciding whether to use investors to fund your business, keep that in mind. In some cases, you may be better off getting the money yourself. The upfront cost is bigger, but you won't have to worry about paying someone back. You also won't have to stress about whether your decisions meet an outsider's approval. But there are some good reasons to use investors—even if you want to maintain control.
Why Funding Is Necessary for Your Startup
There are often two things you need to make a solid business plan a reality: hard work and money. An entrepreneur is usually no stranger to getting their hands dirty, so to speak. You expect to work hard, and you're ready to get rolling. But if you don't have the money to get off the ground, all the hard work and ideas are useless.
Although there are no hard and fast rules, here are some situations where an investor is useful:
- When your business needs a significant amount of inventory to get started
- When you need office space to buy or rent
- If you have to invest in technology to get off the ground
- If you have to pay off old debt before you can take out a new business loan
- When you know you're going to need to expand shortly after launch
- When you know you won't be profitable for many months or even a few years
If you're considering how to get investors, you may find that one of the above situations apply to you. But if the idea of sharing business control with outsiders doesn't sound appealing, consider bootstrapping.
Bootstrapping vs. Investing
Bootstrapping is when you get startup money on your own. In other words, you are self-financing. When you finance your business using external people or organizations, you're using investors' money instead of money you generated on your own.
On the surface, the two seem like polar opposites. But this is not always the case. Here's why: Your time and efforts have value. If you have ever worked at a job and made an hourly wage, you understand this principle—but from the other side. When making money by the hour, you understood that a company valued your time and effort. They demonstrated this value by paying you.
When starting a business, many entrepreneurs forget their time is valuable. If they spend more time building their business, they may make more money in the long run. In that case, there's little difference between investing and bootstrapping.
For example, if you find you're able to recruit new clients with a little time and effort, that has value. If you spend time on other aspects of the business instead of finding new clients, you're investing resources. You're investing the money you would make in the future from the clients you could be recruiting. You're also investing your time and effort. It's a give-and-take dynamic.
When the business takes from you, you're giving something up. In a situation like this, you may be better off hiring people so you can commit to building new business. You may need outside investors to make this happen.
But sometimes, it makes sense to bootstrap. Instead of worrying where to get investors, you can generate your own seed funding. As you work to raise the money yourself, you're forced to consider which things are most important. For example, you may not need office space right away. You also may not need a company vehicle or a series of new computers.
When you get cash from an outside investor, it can be tempting to spend it on unnecessary extras. While with bootstrapping, the work it takes to generate funds may give you pause and force you to think twice.
If you decide to bootstrap, you won't have to worry about finding investors to invest in your small business. This takes away some of the pressure that comes with starting a new business. If you do decide to source funds from outside, you have to know where and how to find investors.
Top Tools for Finding Investors
Before you even begin searching for investors, keep this in mind: Investors want to make money. This is not a run-of-the-mill cliché. Many entrepreneurs think that investors are in it for other reasons. They think investors feel the same thrill they do from the novelty of their idea. While this may be true, it's a secondary reason, at best. Others think investors are good-natured folks who like to help. Again, this is often the case, but benevolence always takes second place to making a profit.
Before even thinking about how to find investors, write down what you bring to the table in the form of a tangible return. Once you have established that, you're ready to start looking. Here are some of the top tools.
Investors look for companies in which to invest online due to the variety of choices. Before reaching out to an investor online, make sure your pitch is compelling. Also, be sure your business plan is comprehensive. You can use any of the free templates available on the internet to make a thorough business plan. Once you have that, you can check the following resources:
- Online banks
- Angel investors online
- Private equity investors
- Forums for startups
- Classified listings for people looking to invest in new businesses
If you're wondering how to get angel investors, you're not alone. There is a good selection of websites that cater to those who want an angel investor to help their launch. Some of these include:
- Life Science Angels
- Golden Seeds
- Angel Investment Network
- Tech Coast Angels
- Hyde Park Angels
They all have unique requirements and target different types of entrepreneurs. Take some time to investigate several angel investors before choosing one. The first bite may not be the fish you want. Take your time and don't settle for a deal you may regret later.
Sometimes, those wondering how to get investors for a small business should stay home. In other words, venturing outside of your community may force you to make sacrifices. You may givelose out on up the sense of obligation a local resource has to helping theyour community. y. You also sacrifice the ability to take a short walk or drive to talk with the investor. Some of the best local resources include:
- SBA loans
- Local business associations
- Business people in the community looking to get a return on their money
- Friends or family members who have money they would like to invest
The closer a resource is, the easier it will be to form a genuine, productive relationship.
People love helping people. It's one of the perks of investing in companies. Mentors get to share their knowledge of business, life and how to succeed. Mentoring someone also gives the mentor validation and provides a way for them to give back. In the process, they get to make some money.
To find mentors, reach out to people for whom you've worked in the past. Let them know what you're interested in learning from them. Be transparent about the fact you are also looking for money. You may want to pitch your idea before telling them how much you're looking for. If they show some excitement, you can go into your financial needs. They may be willing to help you out.
Once you have your idea and business plan, you should keep an eye out for events that investors may attend. Most go to these types of conferences, dinners and gatherings to firm up their network. Many also go with the hope of finding a new opportunity. Your idea could be the opportunity they're looking for.
This doesn't mean you should whip out a business card the second you meet someone. What you do will come up in the course of conversation so there's no need to worry about pitching yourself. Be natural. Make sure you spend as much time listening as you do talking. Your chance to pitch may come up in the second or third time you talk with a new contact you find at an event. That's a good thing. It means you will have formed a healthy rapport, and that goes a long way in business.
Business accelerators can be a powerful resource. An accelerator is an organization that brings together investors and businesses. They also have advisors and mentors that provide advice and guidance.
Usually, businesses that use accelerators are already past their infant stages. You could say they're in their "adolescence." They have some momentum already, but they need the "acceleration" of new funding. Accelerators are a great way to get both funds and ideas on how to get your business out of a rut or to the next level.
Small Business Administration (SBA) Loans
You're not the only one who wants your business to succeed. The government does, too. Entrepreneurs provide valuable jobs for the economy. Also, as they make income, they pay taxes that help fund local and national initiatives. Your business's success has a powerful ripple effect on the economy. The SBA understands this and provides loans to encourage the growth of businesses.
If you go to the SBA for a loan, you will need to have a lot of paperwork in order. You will also need a concrete business plan to get the money you want. Getting these things together is a positive step that can help you further hone your idea.
Crowdfunding has taken the entrepreneur space by storm. People can give as much or as little as they want in exchange for a wide range of benefits or products. You can then use this money to fund your business. Crowdfunding sounds almost too good to be true, and in some ways, it's misleading.
A successful crowdfunding campaign takes more than having a cool idea. You need to promote your campaign on social media and with friends and family to give it some traction. You should also provide regular updates about how funds are being spent. Besides having a campaign that's well-publicized, you need to provide hot content. Videos and photos make a crowdfunding campaign more appealing, and thatwhich helps earnings.
Build a Foundation With a Strong Communications Infrastructure
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