You want other people to invest in your business, right?
You can’t even begin to think to start a business without considering your options for capital. Most entrepreneurs will require some amount of investment to get their business off the ground. If you are lucky, you can self-fund your business. For many entrepreneurs, it is necessary to get outside investment.
Even if you have the money to invest in your business, getting outside funding is a great way to reduce risk. Finding investors for your business is a lot of work. You can consider it at the very least a part-time job. At times you might have to spend more time finding investors than working on your business. It is hard work to get investors, but it is doable.
Today, entrepreneurs have more options to find investors than ever. Finding the right investor is not just about money. It also has to be the right fit. Consider the type of funding you take and the person behind the funding. Selecting the wrong investor could hurt or kill your business.
What are your investment options?
Private Equity investments are just that – private. They are made by either privately-owned companies or private individuals. While these investors will negotiate for a percentage of the company or profits, they very rarely take over control of the business.
Angel investors are high net worth individuals, often entrepreneurs. Angel Investments are similar to venture capital investments in that they offer financial help in return for equity in the business. Angel investors, however, are usually interested in more than just making money. Often retired and very wealthy, angel investors like to remain involved in their industries of choice and be active players in their communities.
Venture Capital (VC) firms are investing in a bit more mature businesses. They are usually funds instead of individual investors. VCs also invest much larger amount than angel investors. VCs invest in the millions whereas angels invest generally under $100,000. Venture Capitalists usually come with business experience and can offer advice when navigating the entrepreneurial landscape.
Understand what kind of help you need and when you require an investment. Will you need capital to start your business or to help it expand? Make sure that you are comfortable with whichever investor you choose.
How can investors help you?
Take the time to get to know your investors. Look beyond interest rates and percentages to ensure that your investor will be a good fit for your company. If possible, find someone who complements your skills. If you excel at marketing but need help with design, try to find someone that can fill that need.
Don’t be afraid to do some research into your investor. Interviews with investors and founders go both ways: you both want to make sure it is a good fit. If possible, contact other business owners who have worked with the same investor to see how their experience was.
Do you know what you really want?
Be prepared when going into an investor meeting. Have a clear business plan that includes your mission statement, detailed numbers, and plan for the future. If you can clearly articulate what you want for your business, it will allow investors to determine if it is the right fit. A well thought out; intriguing business pitch will allow you to connect with the right investor for your company.
photo credit: Empire state building
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