Finding funding is an essential part of managing your business. There are many funding options available, including traditional bank loans, venture capital, and crowdsourcing. However, it is important to select the right investor.
Benefits of business investors
The biggest benefit of finding a business investor is a great way to get capital to help you run your business.
Businesses need capital to grow. Working with business investors allows you to move your business forward without having to do it the traditional way, which is by slowly building each brick. You get cash injections and your business can grow quickly.
This is especially true for Silicon Valley startups. Numerous prominent technology companies required large amounts of cash to quickly scale their offerings and meet demand.
Finding funding is not as easy as convincing investors that you will give them large sums of money. In order to get funding, you must trade something. Venture capitalists or angel investors can have equity in your company which could in some cases mean they have the ability to make major decisions about company matters. Banks charge a premium for borrowing money.
This means that you will pay an interest rate on the money you borrow. There are also strings attached to this loan. Many banks want to know how your plan to use the money before they grant it. Online crowdfunding platforms allow you to trade inside equity or access funding.
Although working with investors can be a great way for your business to grow, it is also a difficult decision. You need to consider all options when looking for funding. Also, consider the sacrifices you are willing to make in order to obtain the funds you require. It doesn’t have to be a difficult task. This distinction is important to make in order to approach funding with success.
How to find a business investor
Finding investors is one of the most difficult aspects of starting or running your business. It’s better to start small, and then move on to bigger opportunities later. This applies both to who you seek funding from and where.
A small business or startup should first look at your community. Small towns and cities are always developing new business initiatives to help local businesses grow. You can try searching a bit more until you find one that supports the industry you are interested in. You may need to travel to the right place for your business depending on what it is.
After you have a business idea, a product/service, and a plan, it’s time to look for funding. These five suggestions will help you find a business investor.
- Collaborate with family and friends. Begin by asking your family and friends for funding. This is a great way to fund your business without having to prove yourself to outside investors.
- Find private investors in your community. Your local community is often the best place to find help in growing your business. Find local investors and business leaders. Any pro-business organization, Network with influential people in your area and build business relationships.
- Get involved with your local bank. Depending on the speed at which you need to scale up your operations, Applying for a loan at your local bank is a great way of building community relationships and finding good funding options.
- Look for angel investors. After exhausting all other options, you can look beyond your local community for angel investors or private investors in your sector. Contact business leaders in the areas where your industry is flourishing.
- Venture capitalists are a good option. Get involved with venture capitalists. This is the last stage of a company’s funding growth. However, it is not a requirement for all companies. If you run a stable, successful small business in your community, You don’t likely need to apply for funding from a venture capitalist. If you have a business idea that is highly profitable and would benefit from rapid scaling and large capital investments, venture capitalists may be a good option.
6 types of business investors
As your business grows, it’s best to switch from small to larger funding sources. While this order is not definitive, it will help you to keep your eyes on the big picture.
- Family and friends: Your family and friends are the best places to start looking for funding. If you are a startup or an emerging business, pitching to friends and family is a great way for your business to start.
- Crowdfunding: Crowdsourcing, much like family and friends, is a great source of early funding. Before you post your product or service on a crowdfunding platform, it is important to determine if there is demand. Combining funds from friends and family with funding from these platforms can make it possible to start your product or service.
- Traditional bank loan: Once your company is established and you have some operational history and backing, banks can offer traditional loans. Banks require financial documentation and extensive documentation before issuing loans. Make sure you have everything. If you are looking to build a local, strong business, Bank loans are a great way for your business to grow from a small operation to a fully-fledged entity.
- Angel investors: Angel investors are similar to bank loans. They can help you grow your business and make it a bigger company. Start by looking locally, and then look further afield until you find a private angel investor.
- Venture capitalists: If you have the right backing, pitching venture capitalists is a great way of obtaining large sums of money to grow your business. When it comes to pitching to venture capitalists, it is a good idea to start by pitching to angel investors.
- Accelerator: An accelerator is a great way for your startup to grow. While some offer funding options, most connect you to seasoned entrepreneurs who can provide advice on how to find funding, develop your products, and build your company. Although accelerators are not often a primary source of funding for startups, it is important to understand how they can help your startup.
Also read: Top 10 Small Business Insurance Companies
How to attract business investors
Although it’s simple to have a general idea about how to raise funding, it can be difficult to attract the right investors or perfect your sales pitch.
Be aware that investors should not be seen as just a funder, but also as business partners. It is best to surround yourself with like-minded people before you dive in. Investors with enough equity in your company will ensure that their voices are heard, especially when equity is involved. These partnerships can be very beneficial, but they can also prove to be detrimental if they are based on the wrong values. These are the main steps to follow when you think about how to attract investors.
1. Develop your company mission
A company mission is essential for your business plan and overall business growth. Investors are interested in your “why”, which is the reason why you believe the world needs your product. Your business should be able to communicate in just a few sentences what it solves. You’ll lose customers and investors if your mission and goals seem too complex. To be successful, you need to explain clearly and concisely what your business is worth.
2. Flesh out your brand voice
As a small business owner, one of your most important tasks is to build your brand and company voice. This is the most visible aspect of your business. Investors are looking for brand value, particularly when it comes to social media and your presence in the local community. You can find the right investors by combining a strong company mission and a distinctive, well-developed brand voice.
3. Take as many meetings with potential investors as possible
Meeting with potential investors is key to finding the right investors. Every opportunity to meet with potential investors is a good deal. This will help you refine your sales pitch and also allow you to get to know potential investors so that you can choose the right partners. It is not uncommon to be rejected or judged when seeking funding. You can increase your chances of getting funding by attending as many meetings as you can.
4. Keep going
Don’t be discouraged if potential investors don’t fund your venture. It is part of the process. Focus on the next opportunity. Recall your mission and keep moving forward when things get tough. It doesn’t matter if only one investor offers to fund your company out of the 50 that you meet. That’s a success!