Are you thinking of tapping investors to help launch your startup? The good news is that there are different ways to raise funds. Here are some you can try.
As you slowly build your startup idea, you’ll need capital infusion to survive. Substantial working capital is critical to leverage your startup to its potential. In fact, some of the million-dollar businesses today still go through fundraising rounds to ensure their longevity.
So, how do you raise capital? One feasible option is to find investors. Choosing the right investors is key to the success of a startup. Today’s article discusses the different ways you can get funding for your business.
Ways to Find Investors
Write a well-crafted business plan
Before you get busy with finding investors, you need a concrete plan to run a business. What does your target market need? Do you have the solution to answer these needs? Do you have enough capital to operate a startup?
A business plan is your gateway to raising funds. Startups with a well-thought-out business plan have a strong chance of attracting potential investors. You see, investors are normal people just like you.
They want to know that they made the right choice of investments. Additionally, a business plan gives them an idea of how you plan to operate and grow the company.
Your business plan should completely describe what your business is about. It answers who you are and what you do. Also, it identifies who your competitors are in the market.
Most importantly, a business plan should provide a clear financial projection. How will your business grow financially in the next four to five years? Make sure to write them all down in a business plan.
Find a Mentor
Building a business is exciting. However, the world of business also comes with challenges and uncertainties. The great thing is that you don’t have to take this journey alone.
Essentially, you need a support system to help you scale up for success. You need to find a mentor who understands your business. An industry mentor offers you expert guidance and connections to navigate around the industry.
They could be industry experts, successful entrepreneurs, or esteemed influencers in the circuit. Their knowledge and experience should guide you to find the right investors.
Research Potential Investors
To find potential investors, take stock of your existing network. Create a list of investors that parallels your business goals. We recommend a list of 40 to 50 investors to increase your chances of winning.
Aside from your direct network, there are tons of other places to get funded. Here are other places to tap into to find investors.
Who would be the most viable investor for your startup? Of course, you! At the initial stages, startup owners will find it difficult to raise capital externally. Hence, they may opt to fork over their money as initial capital.
While bootstrapping is risky, this allows you complete control over the company. Similarly, it protects you against possible debts if the business does not go as planned.
However, your savings might not be enough to sustain the operations. So, consider other sources to beef up your working capital.
Family and Friends
Another great option is your family and friends. Since they know you well, it’s easier to approach them with your proposal. Close friends and family members are more likely to support and believe in your project.
But there’s a downside. Tapping them for capital funding may also bring out stress and tension in the relationship. This is something to take note of before you accept financial assistance from close family and friends.
In recent years, we’ve seen the advent of online fundraising platforms. Generally, they are popular with startups looking for investors. These chief platforms are:
- Peer-to-Peer Lenders – these are individuals or organizations that lend capital to small businesses. Prosper and Lending Club are examples that do P2P lending.
- Crowdfunding – crowdfunding sites such as Kickstarter and Indiegogo pool money from different investors to fund potential projects in return for profit.
- Angel Investors – These are affluent individuals with a $200,000 minimum income or those with a $1 million net worth. Angels typically fund startups in the early stages or those who are unqualified for Venture Capital Funding. AngelList and Wefunder are popular sites to find angel investors.
Building a successful business is all about forging relationships in the industry. Make yourself more visible to increase your chances of attracting investors to your startup. To do this, find out if there are any events in your area. Participate in these events to get your best foot forward.
If there are pitching events, this is a great time to present your startup idea. Mingle with startup investors who might help you get a leg up in the business.
Businesses apply for a bank loan to get access to capital. Banks grant loans to borrowers in exchange for collateral. Also, they earn money through interest and fees they charged on the money.
Generally, banks have strict qualifications before they give out loans. Hence, banks usually give preference to large companies over small businesses when it comes to loans.
A venture capital fund is a collective fund managed by a VC firm. They pool the money from individuals, financial institutions, banks, insurance companies, and other private organizations.
Additionally, VC firms invest in early-stage startups in exchange for equity in the company. This means that the founders might have to give up a portion of the ownership to the VC.
Interestingly, your chances of raising VC funding are great when you can show that your startup has high-growth potential.
Another option to get loans is through microloans from the US Small Business Administration (SBA). A startup may get loan amounts in small increments. Or, they have to access up to $50,000 as capital.
Universities, investor firms, and other large organizations may offer accelerator programs. Essentially, it’s a boot camp that supports early-stage startups. They provide mentorship, education, and funding. Stripe, Dropbox, and Airbnb are some of the successful graduates of startup accelerators.
Accelerator programs are a great alternative to getting mentorship from other founders. Also, they may offer seed investments in return for equity in your startup.
Keep in mind, joining an accelerator program is time-consuming and highly competitive. You need to undergo a long, arduous application process.
Launch a Startup with the Right Investors
Launching your dream startup can be a rewarding endeavor. However, we need to face the reality of starting a business. It’s not easy nor affordable.
Unless you’re a person with deep pockets, you’ll need to tap other resources for startup funding. You can either ask your family and friends or get a bank loan. Other options to consider are crowdfunding, angel investors, and venture capital.
To attract potential investors, it’s important to start with a strong foundation. First, create a detailed business plan with realistic projections. Then, share a compelling pitch deck to convince people to invest in your startup.
If you need someone to steer your startup in the right direction, we’re here for you. Tech entrepreneurs Matt DeCoursey and Matt Watson can be your mentors for startup success.
They are the co-founders of Full Scale, Kansas City’s first choice for quick and affordable software development solutions. Also, they host Startup Hustle, a weekly podcast that talks about growing a startup.
From approaching investors to hiring tech talent, the Matts will teach you how it’s done. Contact them today to get your FREE consultation.