Starting your own business demands a lot of hard work. One of the biggest challenges in starting your own business is the lack of enough capital to make millions out of their ideas. According to different surveys, about 94% of the startups crash in the initial year. The main reason for this cause is a shortfall of enough money to get the business moving. So, the biggest dilemma that company owners face is finding the right investors for their business. Here, we are going to discuss a few tips for finding the right investors for your startup.
Businesses at all stages of operation require capital. However, the amount of funding depends on the kind and nature of your business. Keep in mind that the investors are keen to invest their money in ventures that have the possibility to increase their investment with time. Thus, your startup plan should be brilliant enough to turn this idea into a revenue-generating business. If you are looking for money, we have compiled a thorough guide to the different funding options and ways using which you can get a huge fundraiser.
Tips for finding Right Investors for your Startup
Angel Investment for Start-up- Angel investors are the ones who are willing to invest their finance in small scale start-up companies. They are professionals who have currently cashed out and help young tycoons to chase their dream. Primarily, Angel investors invest in the startups mainly during the early stages and get minimum stakes in the company’s shares. While a good return on investment is the problem, Angel investors are also driven by the proposal. Therefore, it is important to ensure that your idea is researched thoroughly and validated. According to studies, startups should only approach them when they are ready with Minimum Viable Product (MVP) and unit economics. The possibility of attracting investors is high if your business is functioning already and you need to pay customers. Traction is significant. Angel investors are always keen to make investments where their money is utilized for the expansion of their business instead of fulfilling their daily operations.
Bootstrapping your business- While angel investors and VC’s are considered as the main source of investment for new start-ups, bootstrapping is one of the significant tips for finding the right investors for your startup. Bootstrapping is a type of self-funding your start-up. Pitching up the investors for a start-up is a difficult task for first-time capitalists. Raising money from your personal saving and asking contributions from friends & family can guarantee investments to start your business. However, bootstrapping is a feasible choice only if the capital need for your startup is a small amount.
Crowdfunding- It is the newest model of funding. It is a much sought-after option by the start-ups and entrepreneurs. It includes taking up money from various people who show interest in your product or services. In crowdfunding, investors are not those professional investors but common people who are interested in investing their surplus capital in the start-ups.
Offline meetups & community- Often, big investors invest in those businesses that are already making profits. If you strongly believe that your business is lacking in terms of reaching the right people, look for communities to network in a better way.
Online Fundraising platforms- The past years have given birth to large numbers of online fundraising platforms. They have become popular with accredited and sophisticated individual angels, investors, and even funds and banks looking for different ways to deploy money. The major platforms run from peer-to-peer lending websites that provide business loans to donation-based equity and debt crowdfunding portals. Even if you do not use online platforms to raise all the money you want, they can be strong enough for getting noticed. The thing that matters is finding the right match in a platform for your requirements and venture, as well as being credible about what it will take to make the campaign work.
Contacting top-tier business schools- One of the vital tips for finding the right investors for your startup is to contact popular business schools. Contact the closest university with a strong entrepreneurial or business program. Generally, they have a powerful network of investors and successful entrepreneurs from their alumni, guest speakers, and faculty. Ask them if they can guide you in the right direction of resources.
Social Media- It can be your best friend as a lean startup or solo entrepreneur looking to check the market, grab the attention of investors, and gain traction. It makes it simple to be found and is still one of the important cost-effective methods used for reaching others. You can follow an inbound approach with your own updates and posts or take an active approach with collaborations and leveraging sponsored influencers or posts. You can even use direct messaging. If you can find the social profile handles of well-fitting investors, it might take one great message to connect with the money your startup requires.
Accelerators/ Incubators- Businesses in the Pre-Seed Stage that show important promise can apply to accelerators or incubators receive several benefits. In most of the cases, if your organization is asked to participate in one of such programs, you can expect a state-of-the-art at the work environment, powerful industry connections, business mentorship, and for the most favorable ventures, seed funding. Being accepted into a startup accelerator or incubator is quite difficult as there is a good amount of competition. In addition, receiving money is not a guarantee as most of these programs are designed to assist an entrepreneur to grow his or her business by offering resources and mentorship other than finance.
Venture Capitalists- These investors are a significant part of the private sector and have a huge amount of money to draw from foundations, corporations, organizations, and pension funds. Investments in businesses that are rapidly growing or have the ability for substantial growth can leverage $7 million based on several factors. Venture capital investments are common for biomedical and tech companies. These companies will play an active role in your startup, as they will get some equity in exchange for money and will assist offer expertise in guiding you throughout your development stages. Venture Capitalists for startups can be used in the late or early stages of development as some specialize in working with organizations in the Seed stage whereas others may prefer to work with more established companies. It is ever-changing and needs important research before coming in terms with VC investors on a funding round for your startup.
Venture Debt- This kind of funding is only available to those industrialists whose firm is already venture-sponsored. Venture debt financing is significantly a loan that you need to repay, regardless of if the firm is worthwhile, without having to provide equity. Repayment terms can differ, but three years is the average time. Venture debt is one of the best tools for short-term financing, mainly for firms who want to make a one-time purchase and just do not have enough money on-hand at a time, like a seller re-stocking for their peak time. Making an entry into a venture-debt agreement must not be considered lightly. Missing one repayment could force the firm into being liquidated or sold because of unfavorable default terms that are distinctive of this funding choice.