New businesses always struggle with finding investors for their projects. The saddest thing happens when promising projects have to turn down their activities because they failed to find a good investor.
It can be daunting to find investors for startups. We remember how it feels to have no knowledge or preparation. That’s why we’ve created this guide. Now you will learn:
- How and where to find investors
- How to attract the right ones
- How to get ready for the interview with your potential investor.
How to Find Investors for a Startup Business: Getting Ready
Surprisingly, when you have a conversation with some aspiring businessmen, you realize that they are not ready for negotiation at all. Before diving into the process of finding investors for a startup, we encourage you to align your strategy with the following steps:
Have a Business Plan to Share
A thorough business plan is your road map to solid results; it’s true. Moreover, your potential investors want to know where their money is going and how you’re planning to spend it. So, to find startup investors, be sure to present your goals, strategies, and financial projections. Ensure it is thorough, clear, and convincing.
Keep Your Finances in Order
Show your investors that you are good at handling your finances. First of all, that means keeping accurate and up-to-date financial records. But in the end, that will show that you can manage any investment effectively.
Be Ready to Reject an Offer
To find investors for your startup, you don’t have to accept the first offer you get. Not all investments are good! Be prepared to turn down offers that don't align with your vision or terms.
Secure Your Funds Using Credit
Building a credit cushion can help you manage cash flow during the investment search. That’s a great step toward securing your financial health.
How to Find Investment for Startup: Types of Business Investors
Investors are as different as the projects they’re dealing with. Each with their own advantages and disadvantages. Therefore, we created a detailed comparison table, which can help you choose the right one for your project.
|
Type of Investor |
Description |
Pros |
Cons |
|
Angel investors |
High-net-worth individuals investing personal funds |
Flexible, mentorship |
Limited funds |
|
Venture capitalists (VCs) |
Firms investing pooled funds in high-growth startups |
Large funds, network access |
High expectations, loss of control |
|
Accelerators and incubators |
Programs offering funding and support services |
Mentorship, resources |
Competitive, equity stake |
|
Equity crowdfunding |
Raising small amounts from a large number of people |
Access to a broad audience, validation |
Time-consuming, potential dilution |
|
Friends and family |
Personal network investment |
Trust-based, flexible |
Risks to personal relationships |
|
Traditional business loans |
Loans from financial institutions |
No equity loss; predictable terms |
Repayment obligations, interest costs |
Where to Find Investors for Startup
You’ll be surprised to learn that there are plenty of places to find startup investors. Here are some of the best places to start your search.
|
Places to Find Investors |
Description |
Pros |
Cons |
|
Business incubators |
Offer funding, mentorship, resources, and networking opportunities essential for early-stage startups. |
Comprehensive support, mentorship, and networking |
Competitive to get into |
|
Banks |
Provide traditional business loans. |
Funding without giving up equity and predictable repayment terms |
Requires a solid credit history and business plan |
|
Accountants |
Have connections with investors and can provide valuable introductions. |
Professional assistance and preparation of financial documents |
May charge fees for services |
|
Crowdfunding platforms |
Platforms like Kickstarter and Indiegogo raise funds from many people. |
Access to a broad audience, validation of ideas, initial traction |
Time-consuming campaign management, potential dilution |
|
Networking events |
Industry conferences, trade shows, and local business meetups to connect with investors |
Direct interaction with potential investors and the opportunity to build relationships |
It requires time and effort to attend and network |
|
Pitch nights |
Events to present your business to a group of investors |
Direct feedback and the opportunity to secure investment on the spot |
Requires excellent presentation skills |
What Do Investors Want to Know About Your Business?
You have your plan; you have a couple of investors on your list. That’s great; we’re almost there. Still, investors have specific criteria when evaluating potential investments. Here’s a list of what they typically look for:
Business plan. A comprehensive and clear business plan.
Business model. How your business will make money.
Company differentiators. What makes your company unique.
Team members. The qualifications and experience of your team.
Financial records. Accurate and up-to-date financial statements.
Growth prospects. Potential for future growth and expansion.
Method of return. How investors will get their money back.
Investment structure. Terms and conditions of the investment.
Exit plan. Strategy for investors to exit and realize their return.
How to Find Investors for Startup: Some Final Thoughts
Both you and your business should be investment-ready. For sure, nobody can give a 100% guarantee that their investor’s money is perfectly saved and they get into the right place. The whole journey is going to be a road of success and failure, so our last tip will be to create the right mindset and keep going.
Use this guide to navigate the practical side of the investment and take your startup to new heights.
Sources
From seed to maturity: Funding your tech startup – azbigmedia.com
