What does everybody want nowadays? To have a flourishing business at hand. What is the single impediment everybody faces in starting a business? ‘No money. That right there is the battle call for all of the hopefuls: with the next big bucks business idea but with no resources to start it.
What you need then, is an investor, and not just any investor, an investor who comes with a lot of money, understands the reasons and the nuances of the business, and gives you the go-ahead. That would happen in an ideal world, but there are a few steps that you can take to at least get somewhat close to the ideal investor for your business.
For start-ups, especially in the tech sector, things can get even bleaker if you don’t have an incubator by your side or like-minded investors around you. That is because many of the old-school investors around still are oblivious to the gains these start-ups can get you, and also because of the fact that a profit turnaround for these start-ups is significantly more than, say, investing in stocks or wildly fluctuating currency.
A process as difficult as getting investors on board can be more than overwhelming; but here are some steps that you can take to ensure your odds of getting that coveted green light are more.
How To Get Investors For Your Business?
For your business to grow and for you to realize your dream, we suggest the following steps to take if you are just starting out in this sector and want someone to back your next great idea.
Because no matter how insignificant an idea might be today, tomorrow, it could be the next million-dollar idea. You can never take chances with things like these.
Now without any further ado, here are some steps for you to get investors for your business.
1. The idea should answer a question, solve a problem
The number one tip any investor can give you, or the single most important takeaway you can get from every episode of Shark Tank is this. If your product or idea solves a question or a problem faced by many, you’ve already won the investor over.
That is the single most defining factor and the most important step you can take in the start of getting investors for your business.
That’s because out of a billion ideas the collective humanity has every day, only a few can solve a problem, and even fewer can answer a global question. So, always look for a solution to your idea or problem.
2. Network Extensively
‘Your network is your net worth. Alright this quote might not apply to this particular problem, but there’s still an important takeaway from this. Networking might be socially and mentally exhaustive and wracking, but networking gets you free exposure and even coverage.
The word-of-mouth strategy here is perfectly applicable; you tell your business idea in five groups of five people each, that’s 25 people altogether. Some of them might like that idea and transfer it further to other people until it gets to a person of interest. This chain is what essentially networking provides you, and it is this chain that can eventually land you an investor.
But networking about the next tech idea won’t work when you’re sitting with philosophy majors. The second point here would be to network in circles where your ideas will be appreciated. Here are some spots that you can use to your advantage.
- Chambers of commerce (local, regional offices)
- Social media groups for specific industries
- Specialized affiliation groups
- Incubator centers
- With like-minded people
These spaces are filled with people more receptive to your ideas, and it is in these spaces that you can find out a potential first investor for your business.
3. Attend Incubation Events
Incubators are popping up everywhere nowadays. And that is a boon for you; these are basically centered with investors on the board to listen to your idea and respond accordingly to it.
Think of incubators as Shark Tank-esque places only less intimidating and filled with less pretentious people. There are state-sanctioned incubators, private incubators, and many other local establishments that allow you to come and pitch your idea to a board of investors, again, much like Shark Tank.
Incubation events are events where incubator centers basically take a camp out and meet people to discuss business ideas, encouraging people to come forth and share their business ideas with the world and a select group of people who can find them investors and people to back their projects.
4. Look into Options Like Crowdfunding
Okay, for some people, standing up on a podium and explaining why a taco needs an edible sewing thread isn’t their cup of tea. We get it. But what if you could take your query to the people themselves?
Yes, we’re talking about platforms like GoFundMe, which allow you to state your idea, add a little detail, and wait for the people to interact with it and react to it.
As of late, GoFundMe and crowdfunding, in general, have really taken off, as it is a relatively easy and less intensive way of clamoring for investment for your business idea or business.
Sites like Kickstarter also allow for the person behind the idea to go directly to the investor, cutting out the middleman and making sure that the investor gets the full side of the story.
And the numbers are equally impressive and should convince you to head for any of these sites next time you have a lightbulb floating around your head: in 2020 alone, crowdfunding raised a whopping $215 million, whereas the number of investors at crowdfunding sites and options has raised by about 75 percent in a single year; from 2019 to 2020, where the investor number reached nearly 360,000. Now there’s a piece of pie you definitely have to get.
Types of investors
While there are many parties or individuals who could be considered an investor based on the virtue of their jobs, generally speaking, there are two types of investors that you can get for your business.
1. Angel investors
As the name suggests, angel investors are people with a lot of capital to spare and a lot of investment money at hand. These are usually people who come in at the starting phase of the business and are looking to stay for a long period of time, possibly looking for a leadership role in the new, nascent business.
Angel investors are really popular with new business owners and incubation centers because aside from the fact that they come with a lot of investment, they can also provide valuable leadership insight and experience to the new struggling business, and usually exit when their investment has paid off and the brand or business has been made stable and healthy and into a well-functioning one. Getting an angel investor early on can be very crucial in your business journey.
2. Venture Capitalists and VC firms
As opposed to angel investors, venture capitalists could be considered the dark horse of the capitalist, free market system. These are firms or individuals that usually come in not at the start of a brand’s cycle, but rather during the business cycle, especially if they see great potential in it.
Unlike angel investors, a good majority of venture capitalists do not seek leadership positions within the organization, preferring instead to act as the silent partner and let the business run itself.
Both the VC firms and individual venture capitalists are not in the longer run, but rather in it for quick gains. A good example would be a person who comes into a business just after it gets started and invests a large amount of money in it. After the stock price has doubled or gotten even more or if their share has grown many times over their original investment, they will cash out and leave the business.
The main difference between the two types of investors is their dedication to the business they are investing in. Angel investors are in it for profit too, but they are in the long run.
Plus, they usually seek a leadership role in the business to help and play their part in growing the business, which is why many people prefer angel investors over venture capitalists, although the latter have their own set of benefits.
Making an Investor-Friendly Business Plan
Much like how your resume acts during a job interview, in a meeting with potential investors, a business plan is your resume there. It is your go-to document, one that has all the details and all the particulars for them to learn and make a decision based on it.
So, it’s obviously imperative that a good part of your effort goes into making a business plan that not only wows the investors but is also a concrete plan for the initial and undoubtedly the most difficult times of your business.
Making a business plan is unfortunately much more complex and an intensive effort than your CV. But here are some tips for crafting a business plan that increases your odds of winning an investor over.
Business is a numbers game. Accounting, from spreadsheets to balance sheets and ledgers, numbers are what make the business perform well. And numbers are what make a prospective business look good in front of potential investors.
These can be any numbers: whether the investment is needed, how much the investors are poised to earn, and many others. If you have a business that’s already off the ground, well, you will then include quarterly earnings reports, and those better be good.
A single good quarter won’t fly; a consistent improvement over a considerable period of time is necessary for investors to make a decision.
2. Market Research
Equally imperative is market research. The product or service you have, what market or niche does it belong to? What are the numbers of that market segment or niche? How much of a market share can your product or service get?
Are there any competitors you might need to worry about? Armed with all this research and all the facts and figures in your business plan, only then can you confidently step onto a podium with several potential investors facing you.
3. Marketing Strategies
Every new business needs intensive marketing campaigns to help keep the interest up. Therefore, your business plan will also include how you plan to integrate marketing campaigns into your plan, and what marketing campaigns you will be opting for.
4. Financial Feasibility
Aspects of financial feasibility and business readiness are primary parts of your business plan. Nobody wants to be part of a business that has a lot of liability and very less profitability to show for it.
Therefore, your business idea and subsequently your business plan should have both of these aspects right off the bat so the investors can see clearly how profitable it is to get into your business and fund it.
In a nutshell
Finding the right investors for your business is one of the most difficult parts of starting a business, but if done right, can land you critically needed financial and human resources.
Therefore, much of your effort must be directed towards making a business idea and plan that appeals primarily to investors and then to customers.
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Author: Joe Smith