Any new business, no doubt, comes with its thrill but the cost of starting it up is always on the high. Due to this factor, it is not surprising that many would seek investors who can help them retire the initial costs that are necessary for starting up. Investors can be said to be people or groups who put out their cash to assist a certain business grow. In this article, you’ll learn the places where an investor can be found and the means for attracting him or her to your startup.
Knowing the Different Categories of Startup Investors
There are many different kinds of investors and you shouldn’t think they are all the same. Each of the different kinds of investors has a unique manner of assisting startups. Understanding these types will enable you to get the most suitable one for your startup.
The Angel Investor
As the name suggests, the Angel investors are private investors in which the investors invest their own money. They often come in the initial phase of investing in the business when the business is incorporated and about to begin its operation. Ideally, they want to check into interesting concepts and encourage teams behind them. These venture capitalists can either be invited through professional events and social network sites or in some cases extended family members and close friends.
Venture Capitalists (VCs)
To begin with, venture capitalists are professional buyers who handle big pots of money. In that, they buy shares in companies that are expected to proliferate and to be well known. Most of the time, VCs do not only bring cash to the table; they also offer assistance in the form of advising and networking opportunities. They typically participate in the financing of young companies, which are rather advanced, such as having a prototype or a few early clients.
Private Equity Firms
Private equity funds buy out companies when such companies are grown and require large business capital. More than should acquire some funds to inject into an element, they are into assistance for growth or improving operations. In contrast to business angels and venture clientele, Private equity invests’ operations prefer hiring the elderly in existing companies, as opposed to newer corporations.
Crowdfunding Platforms
Crowdfunding websites allow new firms to collect cash from many individuals with the amounts being minimal. Kickstarter or Indiegogo, make it possible for business aspirants to make their designs and present them to the public. Fundraising is now as simple as creating a new project. The audience is simply asked to support it. The money is raised in anticipation of bringing the offered goods to the market. It helps to build an audience at the initial stage and evaluate the tension in demand.
Family Offices
They are essentially private enterprises that look after a certain amount of funds for a particular clan or a wealthy individual. One of their investment strategies includes investing in new Extech ventures. They are always on the lookout for interesting deals and can shift a lot of money in the process. In other words, they provide additional services, which makes them an asset.
Corporate Investors
Corporate investors may be defined as the big companies involved in the business of providing capital to prospective firms that are about their business interests. They are keen on exploiting promising patents and products in such a manner that they do not conflict with their businesses. In this case, not only do corporate investors contribute money but they also provide a plethora of other resources and even establish collaboration with the startups to make their expansion meteoric.
Accelerators and Incubators
Accelerators and incubators are the schemes that have been hoisted as a strategy to promote the growth of entrepreneurial businesses by offering guidance, financial support, and an office unit. Some deadlines are set for these programs to facilitate the hassle of the target customers so they help develop startups for, say, some months and there is a pitching day at the end of this process. Incubators on the other hand aim to be present for an unspecified period and assist these companies in every stage of their development.
Best Places to Find Startup Investors
To make valuable progress in this search, it is important to know Ad revenue and the right place for meeting with the right people. Here are some of the measures one could take to assist in the investment search process.
Networking Events and Conferences
Business owners, investors, and other professionals come to these pools of networking events and conferences. These events are for meeting investors, learning more about the industry, and pitching your startup ideas.
Online Investment Platforms
Startups raise funds globally through online fundraising platforms like AngelList or SeedInvest. The business can set up a profile, make some posts, and even market itself to businesses seeking people in your field.
Pitch Competitions
Pitch competitions offer business persons the chance to sell their business ideas to potential investors as members of a panel. Earning a win in a competition gets you exposure, access to financing, and the perspectives of veterans of the industry.
Startup Meetups and Community Groups
Launch parties and social gatherings for businesses offer informal opportunities to get to know other business champions and potential financiers. These groups usually conduct seminars, conferences, and other kinds of activities to promote interaction which can help you locate suitable investors for your business.
LinkedIn and Social Media
Using LinkedIn for investor relations is a rather effective option. You can get in contact with these investors through various Skype apps, participate in active content posting, join groups, and promote your company. You can also use other social media like Twitter and Facebook to reach investors.
Academia and Scientific Organisation’s Initiatives
Programs aimed at promoting startups, especially tech-based ventures, are usually also undertaken by universities and research institutions. They may assist startups by linking them with potential investors or even offer capital and means.
How to Approach & Attract Investors
Merely coming up with a terrific idea will not be sufficient to attract an investor’s interest in a startup. You have to package your business in a manner that depicts its growth potential.
Crafting an Effective Pitch Deck
A pitch deck can be defined as a visual presentation aimed at attracting potential investors to your business. It should include information about what problem you are addressing and how, what product your audience will use, what is the market for that, and what’s the monetization model for this. This must be a short, coherent document that outlines reasons why the said startup is unique.
Developing a Business Plan with a Difference
A business plan explains what are your objectives and the plan to achieve them. The business plan earns details on target customers and marketing, competition, financial forecasts, and business operations. It is only a well-thought-out business plan that proves you have some seriousness in your concept and for that matter warrants attracting investors.
Creating a Minimum Viable Product
A minimum viable product is simply that version of your product that has enough features for it to be in the market to get first customers. Showing an MVP can help investors understand what you’re building and that there’s a demand for your product.
Proving a Market Presence and Growth Prospects
Market traction refers to exhibiting that the target customers are interested in your product or service. It could be in terms of sales, registration, or any other participation behavior. There is a need for investors to check on the market demand for your proposed solution.
Creating a System of Warm Leads
Warm leads are contacts that come from known contacts and not just cold leads. These contacts can include other entrepreneurs and personal connections. They may ease the process of having the first meeting and leave a pleasant impression.
Ways to Know the Best Investors to Pitch To
The process of selecting an investor is an integral part of the fundraising process. You are seeking someone who reasonably fits with your type of envisaged business and can enhance its growth.
Doing a Convenient Fit Between Investor and His Desired Enterprises
Understanding the different investment preferences of the investors at different stages is crucial. Ensure that the investor you target is highly commensurate with your stage whether seed, growth creation, strategic guidance, or other.
Looking at the Investment History and Portfolio of Possible Investors
Be sure to find out who are the other businesses the investor has financially supported. Such a record of accomplishment is impressive as it indicates that they do know what they are doing and would, therefore, steer your startup on the right path.
Evaluating the Non-Monetary Aspects: Mentorship and Networks
Cashing investors usually comes with preferable ancillary services as well. Some are ready to supervise, provide techniques, and introduce opportunities that can help develop your business. Select the investors who can help you in other ways, too.
Alignment of Investor’s Interest with Your Interests and Mission
Like many other issues, an investor’s interest is very important. If an investor is emotionally invested in your mission, they will do their best to help you and grow your company.
Frequent Mistakes in Gathering Funds
All levels’ mistakes include raw chances to get the funds raised and consequently obtain many useful connections to investors.
Fishing within the Wrong Market
A hobby, as well as an appetite, is very different among many individual investors. Sounds like targeting the wrong type of investor is a waste of time and thus a loss of opportunity. Focused investors are useful, especially, if they know the particular sphere.
Inadequate Preparation Before the Pitch/Presentation
They will not provide you with money because you know how important this is and because you are clearly instructed on what to deliver. Preparations can range from preparing a brief about the project whenever things get broken down to chasing after relevant data in a wider tertiary system. It is always a formal approach which also betters your chances to sail through.
Concentrating On Funding Only Resources Or Revenues
While money is critical, it is equally important to locate investors who will boost that amount with value. This may come in the form of advice, knowledge in the industry, or connections that can be of help to the company.
Inadequate Follow-Up And Investor Relations Management
So this phase is not only about agreement terms. After getting together with investors, it is worth sitting on your hands. It is necessary to update them on what you have achieved, and don’t avoid commenting on any of their questions. Words are powerful, and maintaining proper interactions translates to trust being built, and investors remaining on board.
Employing The Internet To Look For Investors
It may be less tedious getting through to investors on the internet rather than physically searching for them.
Useful Investment Portals (e.g. AngelList, SeedInvest)
The interesting aspect about these sites is that if you are a startup looking for funding you do not have to classify the investors, because in Envestio or SeedInvest investors are interested in anybody’s business. These sites also focus on and combine many approaches to try to get young companies and growth-stage investors.
Employing Investor Research Portals (e.g. CrunchBase, PitchBook)
Research tools such as Crunchbase or Pitchbook will give you essentially all required data for investment purposes, especially for funds looking into your sector. This has made it simpler to identify and investigate possible investors.
Using Networking Applications (for instance, Shapr and Clubhouse)
There are some networking apps such as Shapr and Clubhouse that connect professionals with other professionals depending on similar interests and industry. Such platforms provide a different approach to searching for investors in a relaxed and engaging manner.
Success Stories: How Startups Found Their Investors
One of the most helpful lessons is learning from real life and real cases of how other startups managed to find investors.
Case Study 1: Networking at Events
One startup got its first investor from a local starter event. They pitched their idea to some members of the audience and showed great potential as a networking startup for them to get seed funding to start running.
Case Study 2: Success through Crowdfunding
Yet another company managed to secure its initial funds through a crowdfunding campaign. By speaking to their audience more engagingly, they managed to raise funds but also create a base of early adopters.
Case Study 3: Finding Investors on LinkedIn
A third one used LinkedIn as a tool for finding investors in their industry. With the help of Facebook, they were able to maintain a steady stream of correspondence with potential investors and keep them posted on company developments.
Frequently Asked Questions About Finding Startup Investors
There are struggles in trying to find investors and for that reason, many entrepreneurs have several queries on procedures.
What is the Ideal Percentage of Equity to Be Given to Investors?
It is mostly determined by how much money you want to raise and at what level the startup is. There is a need to also be careful so that enough funds are raised, but at the same time, too much control is not given away.
What are the Things that Investors Expect to See from a Startup?
The team, their need in the market, a working model, and traction, these investigators typically will look for. Your ambition is to show that your enterprise is something more than a startup and that it has considerable room for growth and success.
How Much Time Does it Take to Search for an Investor?
It usually does take some time, very often several months or more, to pinpoint the appropriate investor. This encompasses the steps of finding the people, making the pitch, haggling over the deal, and getting it signed. It requires both time and effort.