Regardless of how innovative or awe-inspiring, your product idea is, if there is no money to back it up, you will only be able to sustain your business for a fleeting time, or worse still, keep daydreaming. Well, unless you receive a random call from the producers of Shark Tank by a fluke of luck, you need to forage for finances.
One of the major problems that today’s Entrepreneurs face is finding investors for their business? Amazingly, unlike old times where there were no social media and crowdfunding websites, founders used to spend their days in the garden of a potential investor, or in a networking event talking to real people.
If you don’t have any idea how to pitch your product, check out pitch-deck templates that can help you pitch your business ideas in a persuasive way.
Whether you’re looking for small term or large-scale investments, here are some ways in which you can meet your ideal potential investors & force them to invest in your business without giving any second thoughts.
Start with friends & family – the love money
I don’t know about you, but when I was little, I used to borrow money from friends & family to try out various ideas that kept popping up in my mind. Sometimes, it was something as simple as setting up a lemonade stand on a scorching summer day, at others, I was launching my own printing business from my room.
When it comes to asking for money, friends and family are the obvious first choice. Firstly, you don’t bite your nails in apprehension at the thought of it. You know you can count on them. Second, they don’t expect a strict ROI from you. They simply invest because they believe in you and no matter how many times you mess up, it is your friends and family who will have your back time and again, without doubting your idea or efforts.
But the only thing that has changed since I bade farewell to the good old innocent days, is that back then, failure didn’t mean that big of a deal to me. If something didn’t work, I simply moved on with the next idea. Now, I have bigger responsibilities to shoulder, so I must give back even if they are not asking.
A general rule of thumb is that if you’re starting a business which requires an investment below $50,000, it is good to ask your loved ones to invest in the business. Otherwise, for investments above $50,000, you need to go for angel investors or venture capitalists.
As mentioned earlier, an Angel Investor is someone who will invest more than $50,000 in your business. However, before you start looking for an angel investor, it is good to know some things first.
Normally, an angel investor will ask for 8 – 10% of the profit for a period of 5 years. The good thing about angel investors is that they won’t get involved in the business, as long as they are getting their fair share.
As for venture capitalists, they seek serious involvement in the business and decision-making process. There is a difference between an angel investor and a VC. If you don’t know where to find angel investors, go for this list.
If you are asking for investment greater than $1.5 M, you need to hook in a venture capitalist. In return, they generally ask for a 30% share in the company. Take a good look at the list of venture capitalists and seek help from them.
Venture Capitalists are more inclined toward your long-term plans. What do the figures say? When will they start getting ROI? If they are getting their money back, they won’t bug you. But, if you’re not giving them back, they will withdraw their investment, leaving you lurching by a thread.
Besides from startup funding sites, where you can find investors, there are social websites that can help you solicit investment for your business. I am not at all talking about Facebook or Twitter, I am talking about Quora & LinkedIn.
Don’t be perplexed. Yes, there are actual investors hanging out on Quora. Regardless of its core purpose, which is to help people solve their problems, it is a social hub of angel investors and venture capitalists to seek new ideas and invest in them. If you’re not using these social sites, you’re missing a good chunk of investment for your startup.
Another website is “Idea of Entrepreneur.” You can pitch your start-up idea and wait for the investors to invest in it.
What is crowdfunding? It is basically about gathering people to support your startup.
Nearly everyone is aware of Kickstarter.com. Indiegogo is another crowdfunding website that can help you get funded for your grand idea. Talk to investors, sell them your idea and establish long-term relationships with your investors directly.
Finding the investor is the easy part, but to make them realize that your business is a growing business is hard.
3 strategies to win the hearts & cash of investors
- Knowledge & Confidence that your startup is the right place to invest in
While talking to the investor, you need to ensure that you have a solid plan in place. Not just a PowerPoint presentation, but a persuasive pitch as well.
- Add value to people
Next comes adding value to people’s lives with your product. If your product is improving the lives of people, figure out an angle that can showcase it in that way. Pass on your excitement to the investor and make them believe in your product.
- Have a deal ready
Do you have all the numbers in place? If not, get it done before you pitch them to the investor. Future predictions, how much return will the investor get in the next 5 years? Or when can they expect ROI?
If you can acquire real customers, you will be under less pressure to seek outside money. When you do, you can achieve better terms from better investors. But as a startup, you should know how to find investors who can help you kick-start your business.