Finding investors is one of the first concerns that many entrepreneurs face at the beginning of their business journey. Investors can benefit your company in many ways. One of the most obvious advantages is that your business can get many financial rewards that can lead to its improvement.
Finding investors is especially beneficial if you do not want to take out a loan. You can also build connections with the right people that may bring their knowledge to your company.
If you are sure that you need investment, the next step is to find people who can provide it. Here is what you need to know:
Believe in your project
It sounds obvious but if you want your enterprise to succeed, you need to fully believe in it. You need to convince yourself that it will be profitable and convey confidence at the time of selling your products to customers.
Imagine that your business is your child. You would do anything for your children. The same attitude should be applied to your company.
Know what your potential investors are looking for
In general, investors focus their interest on three aspects:
- A person or team behind the business
- The business itself
- What they will benefit if they invest
Often, when it comes to finding investors, the great obstacle is combining these three points. What usually happens is that you have a great team and an interesting idea, but if you are only starting your business, investors will find it unprofitable to get involved if you do not have anything unique to offer.
Create a business plan
When the three aforementioned conditions are met, then you can affirm that you already have the pillars of a business plan. The objectives of business plans are to provide credibility to the project and make its materialization feasible. To do this, you have to control cash flows, forecasts regarding ROI, and carry out a market analysis to study your competitors.
Focus on the next round
Although it would be ideal to obtain all the necessary financing at once, you should be realistic with the numbers and include the investment destined to get clients, human capital, marketing strategies, etc.
It is much more sensible to consider a rather fatalistic situation and calculate the cost high. Often money, time, and effort invested are higher than what was anticipated.
How to find investors
3F (family, friends, and fools)
If you have family members and friends who want to support your business, you are lucky. That means they share your values and believe in what you do. Every year around 40% of businesses receive capital from relatives or acquaintances.
This way of getting investment can give you a piece of mind because you know that these are the people you can trust. However, do not prevent the people who invested in your business from participating in any activities. It may make them feel left out and used.
These are private investors who wish to invest part of their assets in companies that are in their initial phase. In general, in addition to the economic contribution, they can contribute as advisers, since they usually have professional experience in certain sectors.
You can get phone numbers and emails of potential business angels on Leadar. They can be a great way for your company to gain ground and succeed.
Business accelerators, or seed accelerators, are programs that promote startups. Such programs offer potential investment, support from mentors, the opportunity to work alongside similar businesses, and intensive learning. Actions such as digital education and tutoring are also included.
Research before you apply for this program. Make sure you know about all pitfalls.
Crowdfunding consists of collective financing by a community that makes donations in exchange for some type of reward. The main benefit of crowdfunding is that it is more efficient than traditional fundraising because the latter requires more time and effort.
Crowdfunding is especially beneficial if you are just starting your business.
Are business angels the same as private investors?
Business angels are not the same as private investors. Private capital comes from specialized financial entities, which invest capital for a certain time in exchange for shares. However, they do not advise or participate in the company’s decision-making.
Business angels are businessmen who provide advice to entrepreneurs, especially in the early stage of the development of the organization. However, they also do participate in decision-making.
Financial entities invest when a company already has a developed business plan and the private equity is in a more advanced phase.
Business angels prefer to make investments at the beginning to help company owners to design a business plan. Another aspect that differentiates business angels from private investors is the economic area in which they deliver their capital.
Tips for attracting investors for your business
Searching for investors is not rocket science. Here is what you should know:
Know every aspect of your company
Its profitability, risks, capital, and employees who work there. By doing so, you will feel more confident in passing on that information to potential investors.
Prepare a presentation with useful information
Investors focus on three aspects of a business under development: the entrepreneurs, what it sells, and what is the return-on-investment term.
Design a business plan with reliable data
It is necessary to describe what are the strategies to find financing. Make a plan that will include how profitable your business is, how much was made last year and in general, and what you do to sell your products.
Prepare for all scenarios
Evaluate what to do in the best and worst-case scenarios. This way, you have greater possibilities of managing your resources optimally and realistically.
Evaluate which financing strategy is the most convenient according to your business model
Look through all the opportunities and try to find investors that will be comfortable to work with. There are different strategies you can try to find investors for your business. In your business plan, you should identify which ones you are going to request and what are the possibilities for obtaining the capital.