The business world is very dynamic and competitive. If you want to build an empire, then you need to find an investment partner who will help you realize this objective. Whether you need money for marketing, purchase of new equipment, hire more personnel, or a bit of everything, the right investor will come in handy throughout your journey to success.
One of the mistakes that most entrepreneurs who are looking for investors make is by scouting for the investors who have the largest bundle of cash. Do not get it twisted; remember that for every investment that you accept, you give a stake in your business. So, it is imperative that you make the right decision.
Here are 12 actionable steps to help you find the right investment partner for your business.
1# Be Prepared
Finding the right investment takes time and much determination, and so it is imperative that you be prepared for the process. Make sure that you set aside enough resources to cushion your business from any challenges during your search for an investor. Learn how to market your business online.
2# Consult Widely
Just like any other business venture, you need to make calculated moves. Don’t jump the gun, get to know all the jargons and processes that are involved beforehand to prepare well. Understand the various types of investors and kind of funding that they offer to help you channel your efforts in the right direction.
Here is a list of some of the terms that you need to be aware of:
- Angel Investors: These are high net worth (affluent) investors who are willing to provide capital to startups that are at their early stages in exchange for ownership equity.
- Syndicates and Networks: This is a group of angel investors who are led by one or two investors who have a better understanding of your business industry or idea.
- Venture Capital: Venture capital firms are usually willing to invest large amounts of money in companies in emerging industries or markets in return for equity. Before giving you funding, they will check the feasibility of your business model to know if it works and has the potential to grow.
- Crowdfunding Websites: This kind of websites has gained a massive popularity over the years. They bring together small investors from all across the globe who are looking for an opportunity to invest in a profitable company.
- Seed Funding: This form of financing is an ideal choice for businesses that are in their early stages. They offer a small amount of money to support their operating costs in exchange for equity. The funding may be from friends, family members, angel investors as well as venture capitalists.
3# Money or Knowledge
Investment partners vary in the manner in which they want to get involved in your business. There are some who will give you the funds and let you continue managing the company independently while others apart from providing capital will mentor you as well as help with industry experience and contacts.
It is also important to note that most investors already have a successful business career and want their voice to be heard and considered in the decision-making process. During the negotiations, if you happen to hear the word “smart money,” know that the investor will want to be involved in your business operations in one way or another.
Therefore, you should evaluate what you are going to get from the deal and what percentage of your business you are willing to offer. To avoid getting swayed, you should set boundaries early enough. These limits will help you to know the kind of investors to approach and how you engage with them.
4# Get Insights from Business Owners who have dealt with Investors Before
If this is your first time scouting for an investor, you need to spend time learning about the process to avoid any surprises along the way. Get insights from business owners who have in the past dealt with investors to get a clear perspective of what you should expect. Unless they are in competition with you, they will happily give you contacts, the dos and don’ts and other secrets that will guide you along the way. Attending networking events, seminars, conferences, and other related meetings will also help you prepare well.
5# Create a Wish List
By now, you can create a list of potential investors who match your needs and requirements based on your search. Most of the investors already have a complementary portfolio of businesses that they would want to engage with. Try to see if your venture matches the portfolio of the investor before you engage. Don’t be rigid, more often than not, the investor appetites change depending on the consumers and business trends.
6# Have Your Pitch Ready
As you pitch your business idea to the investors, you will need to present some documents such as financial statements and business plan. Make sure that these documents are accurate and ready days or even weeks before you meet the investors. You also need to be prepared for your pitch to reach beyond the investors you have contacted to as investment is mainly a network driven world. Ideally, the pitch should be able to make sense and stand out on its own.
7# Make the Connection
Investors receive thousands of business ideas, so you need to persevere and be patient. Most of the investors usually give information on their website on how one should reach out to them for investment – read it! If you have an option, strive to have a casual meeting or introduction over a formal process, but you should always be ready for anything and everything. Some investors will insist on a formal meeting or structured pitching procedures.
8# Preparing your Pitch
Here are a few tips to keep in mind when making your pitch.
- Don’t bore the investors with a bunch of complex arithmetic and statistical reports. Instead, tell a story by engaging with the, showing human interest and provide personal details
- Highlight what makes you different in the market. The pitch should show that you have discovered a niche in the market and has the ability to fill it.
- Investors are more interested in a functional business than an idea. Share as many details about your business as possible such as some customers, your team, and cash flow. All this information will help you to win their confidence.
- Have a strategy for your business as investors are more interested and willing to invest if an entrepreneur has not only a short but also a long term plan. This includes a potential exit strategy is the project does not work out.
- Fine tune your presentation and anticipate for questions that they might ask. Needless to say, you should have the answers in advance.
9# Be Confident When Pitching
Present your points when answering questions clearly and show your passion. Avoid rambling at all costs: if you are given a time limit, make sure that you stick to it to allow for plenty of time for questions from the panel. First impression counts and so ensure that you dress well.
10# Identify the Spark
So, you pitched your business idea perfectly, and there is an offer on the table. Before making any more, evaluate if there is chemistry between the investors and you. Do they understand the vision, goals, and objectives you have for your business? If not, consider whether you can hold out for a few more weeks or months for a better offer or you can live with the sacrifice.
11# Do They Have Enough Capital
While it might seem absurd, some investors will invest with bank loans if the deal is too good to let go. If that is the case, make sure that the financing does not exceed 50% of the equity lest you end up in a financial turmoil due to debts that you did not bargain for!
Also, avoid time wasters who will schedule countless of meetings and calls but never commit to investing in your company. Finally, if your ideal investor turns you down, do not give up; there are plenty of fish in the sea who are willing to give you the financial support that you require to make your dream a reality. Be persistent, resilient, and learn as much as possible from every experience.
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