Top 3 Tips for Finding the Right Investors for Your Small Business
We know that starting a business requires more than just a great idea and boundless enthusiasm. You need that initial startup capital to bring your vision to life. Whether it’s money from your own pocket or support from your network, having some financial backing is crucial in those early stages. After all, dreams don’t pay the bills, right?
According to a report, around 1/3 of small businesses begin with less than $5,000, but hey, you’ve got to start somewhere! But, here’s the kicker: on the same report, it says that on average, a small business owner needs access to about $10,000 of startup capital. You’ll eventually need more funds, and finding the perfect match for investors becomes essential. That’s where we come in!
In this article, we’re here to help you navigate the world of investors and find that magical partner who can provide the financial boost you need. So buckle up, grab your dreams, and let’s dive into the exciting journey of finding the perfect investor to show money who’s boss!
Before you even consider raising funds, you must fix your mind on what kind of financing options you will go with (you should partner with your financial plan as you think!) And to know which investor is a good fit for your small business, evaluate their past, present, and future! And for purposes of this article we’ll keep the focus on equity options: Venture Capital, Angel Investors, and Crowdfunding.
VENTURE CAPITAL
Venture capital firms provide equity financing to projected high-growth companies with the potential for large returns.
They often invest in tech startups or other businesses with innovative business models and large market sizes.
PAST
↪️ Do they have pending lawsuits? If so, for what?
↪️ What do other founders that they’ve invested in say about them?
↪️ What about other funders? (reputation)
PRESENT
↪️ Do their values align with yours?
↪️ What is their track record?
↪️ Are they knowledgeable about the space you’re in?
↪️ Do they currently have the money to invest?
FUTURE
↪️ Does your vision for your business align with the vision for your business?
ANGEL INVESTORS
Angel investors are typically high-net-worth individuals who invest their own money in small businesses or startups.
They don’t have to answer to Limited Partners as VC firms do, so they are typically less demanding about a required return on their investment than a VC.
PAST
↪️ What do other founders that they’ve invested in say about them?
PRESENT
↪️ Do their values align with yours?
↪️ What is their track record?
↪️ Are they knowledgeable about the space you’re in?
FUTURE
↪️ Does your vision for your business align with the vision for your business?
CROWDFUNDING
Crowdfunding platforms allow multiple investors to contribute small amounts of money in exchange for a share in the company. Examples include Seedrs, Crowdcube, and Kickstarter Equity.
PAST
↪️ Is the platform reliable? (You can search online for reviews/feedback from other users.)
PRESENT
↪️ Is the model of the platform all-or-nothing or is it flexible?
↪️ How much are the fees for usage?
When considering an investment deal, evaluating the investor as much as they are evaluating you is important. Taking money from the wrong investor can turn out to be a costly mistake that goes beyond mere dollars and cents. It can cost you time, energy, and even your business’s success.
Don’t rush into partnerships blindly. Take the time to assess whether the investor aligns with your values, has a proven track record, understands your industry, and boasts a solid reputation. Seek out feedback from fellow founders and don’t shy away from conducting background checks.
Remember, finding the right investor is like finding a true business soulmate. So, be patient, be thorough, and together, let’s show money who’s boss in the best possible way!
BONUS: To nail your fundraising process from developing your fundraising goals, preparing your fundraising package, what to consider before you say yes, and managing your investor relationships for continued success and sustainability, join the hands-on workshops conducted by our Founder and CEO, Marguerite Pressley Davis. Read here for more details!
