How to locate an investor for your business
When you have a business plan prepared that details your organizational goals, projections and revenue information, the next step is presenting this to an investor. It’s important to find an investor who believes in your product and has the necessary funds to support you. Follow these five steps to help you locate an investor who will collaborate effectively with you and your business:
1. Determine the type of investor you need
There are many investors available depending on your organization’s financial needs and structural goals. Pick one that aligns well with your objectives and preferences. Common types of investors to choose from include:
- Angel: These angel investors typically earn over $200,000 a year and have over $1 million in net worth. These investors often collaborate closely with your company and will provide business advice and guidance to new business owners.
- Personal: Your close network like friends and family, are usually considered a personal network. They usually invest early on in your business during the beginning stages of the startup process.
- Peer-to-peer: This is either an individual or group of people that offer funding to small businesses. They don’t often work with banks or financial institutions when providing you funds, so the risks of these investors are usually higher than others.
- Government grants: Some businesses are eligible to earn local or national government grants that support your business when they first open to after they’ve received a strong revenue stream.
Related: 10 Steps to Starting a Business
2. Look for an investor in your community
One of the best places to find an investor is right in your area. Many investors prefer to give funds to other community members to support local businesses. It’s also more convenient for them to regularly stop in and check up on the business whenever they prefer.
3. Start networking
An effective way to learn about potential investors is to network and receive word-of-mouth referrals. Visit local businesses in your community to discover who financially supports their businesses. These business owners may provide you with names of people who are great investors to collaborate with. You could also join trade and business organizations and get to know investors looking for new opportunities. Trade fairs and events relevant to your industry are also a great way to get your name out to potential investors.
4. Research crowdfunding sites
You’re able to find different crowdfunding sites available online that give you access to various investors. Many investors you’ll find on there are accredited and will help you develop and implement your business idea with financial and non-financial guidance and support. Different crowdfunding sites have various ways to incentivize investors, so conduct careful research on each one to determine which ones align best with your organizational goals and needs.
5. Review online lending platforms
Since most traditional bank loans are challenging to earn as a start-up, research online lending platforms to find non-traditional lending sources to support your startup. Most of these lending platforms are a mixture of non-traditional lenders and large investors that want to help businesses grow and succeed. You’ll also be able to find credible lenders by searching through the loans offered by the Small Business Administration by browsing their website.
What to prepare before connecting with investors
When meeting with investors, you’ll need to be ready to convince them why your business is a worthwhile investment. Here’s what to prepare before meeting with them:
Breakdown of your business
Have the basic details about your startup researched and prepared by the time you meet with investors. They’ll want a clear idea of what your company is and how it benefits its customers. Key elements to include about your business are:
- Growth and market size
- Product roadmap
- Where you see your business in the next year and beyond
- Target parget
- Competitive landscape
- Customer profile
- Employee value proposition
Business plan and financial model
When you have a breakdown of what your business and product are, build your business plan and financial model to outline how you’ll get there and any other significant financial projections. Prepare and deliver a detailed monthly financial plan for the next 18 months. Your business and financial model must also describe your specific strategies to make money and how much it’ll equal. This helps investors better understand how much they’ll potentially receive.
From your breakdown, business plan and milestones, craft a compelling elevator pitch that lasts around 30 seconds to two minutes. It must explain what your business does, how you’ll appeal to your target audience and your competitive advantage. Your elevator pitch must grab the investors’ attention and entice them to learn more specifics on your brand and products.
Pitch deck and presentation
When you’re ready to officially present on your business strategy, build a slide deck. Your pitch text will contain the imagery and text on your slides that guide you in telling a captivating story about your business. It’ll also highlight your revenue plan and other financial highlights. Try to stick with two to three minutes per slide or around 20 minutes to keep your investors’ attention and to give enough time to provide them with all the necessary details.
Best ways to approach investors
Here are the best ways for you to approach potential investors:
Meet them in person at events
Attend networking events to initially meet investors and teach them more about your business. Invite them to discuss your investment opportunity further through a lunch or coffee meeting. Take time to learn more about them and allow them to get to know you to find one that matches your goals and financial needs.
Get introductions from friends, family or other connections
You may have people close to you who have already been in touch with certain investors. Talk with those close to you to learn more about them and ask them to introduce you. The person introducing you already has a relationship with your potential investor, so they’ll often trust that person’s judgment of you, initially improving your chances of working with them.
Reach out to them online
Many online platforms allow you to apply for funding opportunities online. Some platforms allow you to list yourself and your business online. This gets your name out to investors and gives them a chance to reach out to you or vice versa. Send a professionally crafted email and invite them to meet in person to discuss your investment opportunity further.
Investors are a great way for your business to earn the financial support it needs. Make sure you’re professional, courteous and polite when meeting with them to give them a better idea of what it’ll be like to go into business with you.