7 Steps to Finding Investors for Your Startup Business
The most important part of launching a startup or trying to find ways to expand and develop is funding. Finding investors for your startup remains a challenging task even though in recent years a number of platforms have been developed to help new entrepreneurs.
Moreover, the competition for these funds gets harsher over the years, as with the technological advancements more young businessmen come up with the idea to launch a startup. There is no shortage of startups out there seeking funding.
You have to be ready to pitch your story.
More startups are coming out every year especially in the technology field. However, the failure rate is still pretty high. In fact, according to the FastCompany article, about 75% of startups fail.
Angel investors and Venture Capitalist are aware of this data and are now more careful than ever as to which startup company they should be investing their hard-earned money. They are very selective.
To succeed in this process, you have to find ways to get noticed by those who want to provide financing in exchange for a stake in your new company.
Remember that you are selling your idea to the investor. You have to interest them, convince them that your idea is the best and it will eventually earn money and provide a huge return on their investment.
Be prepared to present the following to prospective investors:
- Your willingness to work hard for the business to succeed
- Business profitability study
- The business’ marketing plan
- Budget and production details
- Business valuation using realistic data
These investors are not just giving their money to your company. They are investing, and they are taking risks. It is crucial that the business plan presentation is realistic and make sure you back it up with solid data. They want to know the details behind the numbers you presented. Show them that you have what it takes to be an Entrepreneur. They are investing because they believe in you.
Below I outlined several directions for startups to look through when seeking funding.
AngelList is a website providing opportunity for startups to raise money from angel investors. They help investors find startups to invest their money.
It is important that you create a strong profile, with a specific description of your company, the offered products and services, and future plans, to increase your chances of being noticed by potential investors.
Try to filter around 50 investors on the list who will be interested in your startup. Research them and look where they have invested previously, what industry or sector they are specialized in, to easily find the best fit for your company.
What do you need to start a business? Three simple things: know your product better than anyone, know your customer, and have a burning desire to succeed – Dave Thomas, founder of Wendy’s
Be prepared to answer specific questions about your startup. Prospective investors will most likely ask for your timeline, the type of funding and where this money will be used. Be ready with your answers.
According to their website, they are using Republic equity crowdfunding platform.
Another network similar to AngelList is Gust, through which over $1.8 billion has been invested in startups.
2. Crowdfunding websites
For the would-be entrepreneurs or entrepreneurs, another great source of finding investors are Crowdfunding sites such as Kickstarter, Peeerbackers, Fundable, and Indiegogo.
They can help you receive funding from the general public who want to be part of the “next big thing”.
Crowdfunding sites are great platforms to introduce your innovative ideas to investors. These types of platforms have grown in popularity in recent years and now are one of the major ways that you can use in finding investors for your startup or find sources to finance your ideas. They make their money off commissions and other fees, so it’s always a good idea to do your research first.
Here are the most popular Crowdfunding sites:
However, bear in mind that competition is fierce in these websites, and you must have a really innovative idea to attract investors.
3. Common contacts
Check your email list, look at your phone contacts, you will be surprised to see contacts such as a current employee or a partner or previous co-workers. You can always reconnect with them and introduce your business idea or ask for a referral.
Common investors receive a lot of offers from startup owners daily, and that’s why they will favor companies introduced to them by a familiar source. Like the old saying “you never know until you ask.”
4. Small Business Administration
Another great way to finding investors for your startup business is through SBA. More and more programs for stimulating the economy are being developed by the Small Business Administration or SBA, a U.S. government agency providing support to small businesses, and can be considered as a good source of funding. They primarily offer small business loans and grants.
Visit your local bank and ask to speak to their SBA representative.
5. Contests offering rewards for innovative startups
There is a number of such contest, such as the Amazon Web Services Start-Up Challenge (rewards of $50,000 plus $50,000 in AWS credits each year) and MIT pitch, accelerate, and launch contests, offering more than $350,000 each year. These companies are looking for creative and innovative business ideas.
6. Social networking websites
Social networking sites are very popular nowadays not just for dating and friendship but also to connect with potential investors. Some of the most used ones are Linkedin, EFactor, Xing, Plaxo, Startup Nation, Cofoundr, and Meetup.
A lot of people nowadays are on Linkedin which makes it an excellent source to reach out to potential investors. One thing I like about Linkedin is that you can create your profile that is searchable by keywords.
7. Friends and family members
You’re probably thinking, no not my family and relatives. Never count them out, in fact, you should also consider. Yes, you can seek investment from friends and family members.
Talk about your great ideas during family gatherings and let them know how passionate you are. Convincing them may not be easier than you think but pick the right family members to talk to. If these family members are business minded, they are sometimes easier to convince than angel investors who know little about you but be ready for rejection.
With the advent of the internet, your options are many as far as finding investors for your startup. It all depends on where you look and how to look for these investors. The key is to be ready with your business plan when the opportunity presents itself. Best of luck!