By Fernando Berrocal
As the owner of your enterprise, you do a lot of work. You've probably come up with your ideas and got to where you are without much assistance from others. However, there will come a moment when additional cash is required. It's critical to know how to find investors in these difficult circumstances.
The right investors can benefit the development of your business. An investor can mean the difference between your concept getting traction and never staying out of your sight for those still in the conception stages. Let's take a look at how to identify investors and make sure your business is ready for funding.
Searching for investors: 7 Funding Options:
There are a lot of potential funding investors out there, but not all of them are interested in the same company models. Before you start seeking money, you need to know what each sort of investor has to offer and what they're looking for. Here are eight ways for obtaining financial assistance for your new startup:
- Family and Friends:
You can reach out to friends and relatives for funding by calling, texting, or e-mailing them and inviting them over for a presentation. Since you know your family better than anyone, adjust your strategies to their characteristics. You should maintain your professionalism even if you have a personal relationship with your friends and relatives. Explain your strategy in detail, and establish a contract that specifies any financial terms and conditions. You'll be expected to repay the loan at some point.
- Equity Financing:
If your startup is still in the early stages of development but has surpassed the idea stage, equity financing is a viable option. Receiving funding from outside parties in return for shares in your company is known as “equity financing”.
Alt text for the image above: Investors Financing
This method can help you raise money faster, which is especially important if you're struggling to overcome a significant financial barrier. Many people, including friends and family, could provide equity finance. On the internet, you can also look for equity funding groups.
There are equity financing investment organizations and equity crowdfunding sites that can help you receive the money you need by exposing your startup to eager investors.
In this case, if you are looking to raise money for hiring a technical team, the best option around is MassLight. This is a company that builds software for early-stage startups solely in exchange for equity, so you can focus on your main business.
- Venture Capitalist:
Some Venture Capitalists will demand equity or a controlling stake, while others may simply be interested in receiving interest or another type of compensation.
VCs are usually looking for businesses with a lot of room for expansion. A venture capitalist or firm could be a wonderful approach to raise money if your company is rapidly growing in a high-dollar market.
Do some research, ask for suggestions on LinkedIn, and focus on the investors who appear to be the best choice for you.
New to the market is Venture Raise. A tool that connects entrepreneurs with investors through super connectors from the world's top law and accounting firms, banks, and sales organizations. Consider making an account to see where new introductions could take your funding.
- Angel investors:
Angel investors are one of the most popular sources of capital. An angel investor is a person who puts their money into a startup company to help it succeed. It’s unlikely that they’ll want to engage.
Angel investors can finance your firm with little risk, even if it is still in its early stages. Angel investors are well aware that they are putting their money at stake. If your business fails, an angel investor is less likely to hold you responsible than a venture capitalist.
Angel investors, like venture capitalists, can be found in groups. The Angel Capital Association, for example, is an accredited investor network that funds promising startups.
- Accelerator Programs:
Accelerator programs might be private, sponsored by investment firms, or even affiliated with corporations or colleges. While accelerators vary in their offerings, the majority provide funding to help businesses develop. They may offer training, access to specialists, and more resources in addition to capital to keep business owners on track to success.
- Crowdfunding Platforms:
Crowdfunding is a kind of financing in which people "invest" in your business in exchange for a product or service. Instead of interest or ownership, crowdfunding typically involves giving out an early access version of your product or service in exchange for funding.
Crowdfunding is a particularly successful approach to funding ideas that have passed the concept stage and are in the prototyping stage. As a result, both new and existing businesses can benefit from crowdfunding. “Kickstarter” is the most well-known option, and it makes it simple to get your product in front of a large audience.
- Traditional Business Loans:
A bank loan, or business loan, is a loan provided by a financial organization with a set interest rate. Bank loans are suitable for almost every business and can be used for a variety of reasons. Loans, in contrast to the other types of investors and funding on this list, have the strictest requirements.
If you don't have any credit history, your firm will require proof of income or a co-signer if you don't have any. Where to get a bank loan? This can be obtained from almost any financial institution, whether local, national, or online. The Small Business Administration (SBA) is an excellent resource for assisting you in locating appropriate loans through partnered banking institutions.
Quick tips for being investor-ready
Before you look for an investor, verify that your company checks all the requirements. Here are a few tips to improve your chances of impressing investors.
Make sure you have a business plan in mind
A business plan can help investors trust you by demonstrating that you're a competent professional with growth potential. Your business model, any owners, and their specific roles, and your company's financial goals should all be outlined in a business plan. Having a business plan is part of the due diligence for investing in and running a corporation, so if you don't have one yet, that's the first step.
You can design your business plan, but this type of firm can provide greater detail and raise the likelihood that your proposal will check all the boxes for a possible investor. A business that specializes in planning can also help you build a pitch deck. A pitch deck will include facts about your firm and display them in such a way that potential investors will be persuaded.
Organize your finances
Investor or not, having neat and tidy finances is a great thing to have. Clean finances can give investors a clearer image of your organization and show them that you've got it together, just like a business plan can inspire confidence in investors.
Make sure you have a profit and loss statement on hand, as this will provide investors with a concise picture of your company's profitability. If possible, try to maintain a solid cash flow and keep your operational costs minimal. All of these factors will persuade investors that your business is a safe investment.
If necessary, be prepared to say "No"
Not all investors are sincere or looking out for your best interests. You know more about your industry than anybody else. Don't be scared to say "no" to funding if an investor seems to be providing you a bad deal or trying to take advantage of your business.
Yes, you require funds and investors. However, choosing the wrong investor can cause major headaches, excessive interest, and even disastrous legal issues. Being ready to say no to a bad investor means you're ready to say yes to your company.
Know where to look for investors who will help you
No two firms are alike, and neither are any two types of investors. Research each type of investor thoroughly, noting who's searching for what, and what they are offering in exchange for their funding.
Keep in mind that some investors, like accelerators, exclusively work with businesses at early stages.
A business strategy and precise financial records are essential for taking your firm to the next level, regardless of the sort of investor you seek.
Do you have an idea for a tech company, but don’t have any tech experience? MassLight can help. We build software and provide capital to early-stage startups solely in exchange for equity. Learn more about our build for equity program or contact us directly.