So, you’ve got a great idea for a business. You’ve tested the market, created a business plan, and devoted yourself to finding out everything you need to know about the requirements of running a business. You have everything you need, except money. You don’t have the credentials for a bank loan, and you need to find investors but have no idea where or how to start. Below are some tips on how to start raising the funds you need to make your new business a success.
Tip #1 Networking
If you are starting a new business, networking is crucial- it is not an option, but rather a necessity. Reach out to people you know and ask them to recommend you to others. Investors are more likely to take interest in your company if you share a common contact between the two parties.
Make sure you utilize your social networks and build your contact list, so when it comes down to choosing which company to invest in, your company sticks out due to mutual contact between the investor and your company. Ultimately it will give them more confidence when making an investment with your company.
Make sure to not be overly aggressive. Allow investors who are not interested an easy way to decline the investment so they do not feel uncomfortable or pressured, and you do not find yourself in awkward social situations.
Tip #2 Angel Investor Websites
Another tip to finding investors for your startup is creating and building a profile of your company on websites run by angel investors. An angel investor is an individual who provides capital for small startups or entrepreneurs. As explained by Investopedia, “Angel investors give more favorable terms than other lenders, as they are usually investing in the person rather than the viability of the business.”
Profiles on angel investor websites provide information to investors on businesses who are seeking funding. By creating profiles on these sites, you will give investors the opportunity to learn more about your company and what your company does.
These profiles also allow you to learn more about potential investors, which equally as important. One such website is AngelList. You can also raise money through crowdfunding sites like GoFundMe and other similar websites, including:
Tip #3 Research & Outreach
Another crucial step to finding investors is doing extensive research. Perform an online search of businesspeople who invest in businesses that are similar, but not identical to yours. Then, make a list of 30-50 of them that you think might be interested in working with you. Reach out to them individually, being prepared to talk both about your business idea, but also as to why you think they would be a good fit as an investor in your company.
If you cannot articulate your business plan, you have no chance of them investing with you.
Tip #4 Understand the Economics
When reaching out to any investor, it is important for you to be clear about what you are offering in return for their investment.
Are you looking for a partner who will take a percentage of the business?
Are you looking to take the money as debt in exchange for interest payments?
Or are you looking for both?
If you don’t know this going in and are not comfortable with the economics, your chances of success are greatly diminished. Know the fine points of your business and be prepared to answer tough questions. Remember, you need the investor more than the investor needs you, so make sure to structure a deal that offers them something for their money that they cannot get somewhere else.
Raising money for a new venture is very difficult, but it’s not impossible. It takes a lot of research, planning, and time. Don’t get discouraged! If you stick to it and follow a plan of attack, you can achieve your goals and get the investment you need to start your business.
**Side note, The Mogul Mom highly recommends Kabbage as another great source of small business funding.