Any small or big business needs money to function well and reach its objectives. Banks and financial institutions are more than willing to extend business loans so that working capital needs of the company can be met. However, what if the company is just starting off? In other words, what if it is a startup? A company that is starting off would not have a history of successful operations, based on which a bank would extend a loan to it. Due to the lack of adequate documents, a startup would not be eligible for loans from most banks, and would, therefore, need investor funding to begin its operations.
The next issue facing a startup is where to find investors who would show interest? The situation is not as grim as it might sound, as per the experts and there are many willing investors for an entrepreneur who has a sound business idea and knows where to look for those investors. Let us look at how to begin the journey of finding a suitable investor.
Most startups search high and low for investors, but they ignore the most obvious place – their family and close friends. These are the people who would believe in you steadfastly, and if they have any capital to invest, they will do so without a moment’s thought. So sound out your friends and family first.
There are many online lending platforms aimed particularly at startups that face difficulties getting funds from traditional banking systems. These could involve investments from startup peers or large investors who are looking for good ideas for getting handsome returns on their investments.
We are not referring to your Facebook account here. There are many social networking sites which deal with professional and business-related matters, and many of them are dedicated solely to startups. Do some research to find out which are these sites, and then create a profile there. Once that is done, you can share your ideas there with an intention to attract investors.
Stop looking only for money
A new startup needs money to begin operations; that is very true. However, most startups ignore the fact that there are many other things which could help give them a leg up. There are several incubators and accelerators which can provide additional help such as consultancy by experts, office space, networking options with other startups, and of course, the scope for getting funding. Look out for such places and see if you are eligible to avail their services.
Do not ignore small investors
A significant investment or a repeat round of funding from a prominent investor catapults a startup to the headlines for sure, but there is money to be had from smaller investors as well. It is known as Crowdfunding, and it involves not only small investors but also regular citizens who are eager to become part of the next big success story. There are several Crowdfunding sites, and some have particular niches they cater to. Find out the ones that you like, and share your story there.
Birds of a feather
The non-professional social media sites are not to be scoffed at either. Because of extensive usage of some platforms like Facebook, many groups have been formed (mostly by cities) for startups to come together and help each other. These groups would not contain any potential investors, but only fellow startup owners like you, but while interacting on these groups with people like yourself, you are likely to get some ideas to find the right investor for your startup business.
These are the best types of investors. Angel investors not only provide money but also back it up with a lot of other things, which can be collectively called mentoring, and would include things like advice, guidance, and network help. You can look up lists of angel networks to get details of angel investors that you can approach for funding. You can also find listings that are arranged by location and type.
We discussed some ways in which a startup owner can go about looking for the right investors. However, in their hurry to get their bright idea off the ground, some startup owners commit mistakes which set them back a bit. Let us understand some of these mistakes so that you can avoid them.
Have you put yourself in investor’s shoes?
A person who will invest money in your idea needs to be convinced about how well the idea will work, and so he would have hundreds of questions for you. A mistake many startup owners make is that they overestimate the brilliance of their idea and do not think things through to Plan B or beyond. Most startups fail not because of lack of investors but because of a well thought out plan.
One size will not fit all
Aiming to impress all the investors you find is the wrong approach. Instead of focusing on multiple investors at once, you should narrow down your search based on relevance. What we mean to say here is that reaching out to any and every investor you hear of would be wrong because investors usually have a particular kind of company they prefer to invest in, and you must find out which investors are aligned to your business idea and only approach them.
Some people believe that leaving something for a face-to-face is a good idea, so their introductory email does not contain all the information. However, remember that the person you are writing to will not just read your email, but he will also invest money, so he deserves to understand what he is getting into.
A startup will only succeed if it has a foolproof idea and perfect execution of the same. An owner of a startup needs to spend adequate time thinking about his plan and its implementation, and once that is done, there is no dearth of places and ways to find an investor.