There are many reasons a business might turn to outside investors for capital. Startups and established small businesses are those that often seek them. Investors include friends, family, angel investors, or venture capitalists. Startups have difficulty getting business loans so they tend to go with investors when they can. Small businesses look for investors even though this means that they will need to share ownership, instead of standard business credit.
Today we will take about the best tips that will help you find outside investors for your small business.
Use the Right Terms
When people talk about the funding they are seeking, it is common that they use the wrong terms. Venture capital is a subset of outside investment and the most difficult to get. If you need to ask whether your startup is a venture capital, then it might not be. Angel investment, friends and family funding is not venture capital.
Do Not Seek Funding from Multiple Investors
When you are seeking funding, avoid email templates. Investors will not read executive summaries or a business plan when it looks like it is being sent to multiple investors.
Do Your Research
Do not ask directly to your friends and family if they would invest in your business. Instead, you should describe the business and ask them who they know that might be interested which will be less awkward for both parties.
For angel investors, identify your targets carefully before moving forward. Identify a select few angel investors that invest the amount you need in your industry and at your stage.
Angel investors have their own unique interests and identifies. They have preferences about where they invest at what stage and the amount. Most of them have websites and announce their preferences on their websites. They do not want to deal with people who are not in their category and do not know it. They are expecting that you already know.
Approach a Few Target Angels or Groups
Be patient and look for introductions by checking with people you know who might know them including business associations, alumni relationships, public speaking dates, and any contacts in the companies in which they have already invested.
Do not be afraid to submit to groups using their websites form but use that as a last resort. Your chances are better if you fit their normal profile and you have been able to meet one of the partners or get an introduction from someone they know.
Have a Good Tag Line
Get your key points down and start with the elevator pitch. Your elevator pitch should be short, and you should describe your business in a sentence or two and make it intriguing. A total of three sentences is good enough.
Have a Good Video or Pitch
Put together a quick video or short one page pitch and send that as a follow up on an email when you talk with an angel or are introduced to one. Great video works better than an email summary. If this works, then the next step is a pitch.
The pitch is a slide deck and the chance where the angels meet you, see your team, and hear your story. To be successful you need to have a good story, be credible, and have the angels assessment of your future prospects.
Have a Business Plan Ready Before You Finish the Pitch
The business plan and pitch go hand in hand. Do not do the plan too big or formal because it will not last and should not be older than two to four weeks.
Expect the Process to Be Long
Due diligence will be months of requests for more documentation. It might take longer than you have initially expected.
Choose an investor wisely. You do not want to make a mistake and having the wrong partner. Investors are not just money. They are people that own the money and become your partner. You are better off with no investment than with an incompatible investment. The wrong investors have killed companies more than no investors at all.