There are several options to fund the startup process or the expansion of a small business. You may choose to dip into your savings, apply for a bank loan, borrow from family and friends, try fundraising, apply for small business grants, or find investors and venture capitalists to back your business model. Some ways may be more manageable and beneficial for your new business than others, depending on what you’re trying to achieve and where you are in the process — are you still at the idea stage, or are you ready to launch?
For new small business ideas, getting the right investor can be the catalyst for their success. That’s why, whether you’re looking to launch or expand, you need to get the attention of investors and motivate them to learn more about you and your business.
In this guide, we’ll present you with five actionable tips to help you gain the attention of investors.
How do you attract investors to your small business?
There’s no one way to fundraise for capital for your business idea. You’ve probably heard of the incredible, unconventional, and even bizarre ways that a business had been funded. But, generally, there are two common types of investors you can attract to fund your business: venture capitalists and angel investors.
Venture capitalists are firms rather than individuals. Since these firms are also funded by investors, their investment decisions can be largely driven by return on investment (ROI) metrics. They’re known to favor established businesses with a proven track record of success and are looking to scale or high-risk, high-growth companies.
Hence, venture capital companies are mostly interested in large investment deals — commonly upward of $3 million. And a deal with venture capitalists may involve an exhaustive and slow vetting process. You should also be prepared to negotiate terms or percentages of ROI and the degree of control they’d have over your company.
On the other hand, angel investors are individuals who want to invest their own money into building a business they find promising. They may also be more willing to support businesses even at their early stages. Often, angel investors may act as mentors and share their expertise with younger entrepreneurs.
There are hundreds of remarkable business ideas and startups popping up every day. And to attract investors, you have to stand out. Below are thoughtful ideas you can put into action to get investors to engage and believe in your business.
1. Use your resources
As a small business owner, networking is an important component of starting and growing your business. Leverage your own social network — your family and friends. Take part in community events, attend seminars in your intended industry, and check out business fairs where you can meet other business owners and start making connections.
Since we live in a digital world, make sure you use social media to your advantage. You can build a personal brand with the help of platforms like LinkedIn and Twitter. Don’t underestimate the authority and connections that a strong online presence may bring to your business.
You can also enter business pitching competitions. Presenting your company at such events will allow you to pitch to multiple investors and gain business exposure. You may even get valuable feedback from potential investors and customers.
To increase your chances of securing funding and propel your business to the next level, make sure you check the qualifications for entry and prepare your best pitch. And don’t forget to network while you’re there. Here are a few startup accelerators you may want to check out:
- CodeLaunch: National Seed Accelerator Competition and Startup Conference for Software Technology
- Postcode Lotteries Green Challenge: Open to entrepreneurs with innovative business ideas for sustainability, combating climate change, reducing greenhouse gas emissions, etc.
- Startup World Cup: Open to all industries
- New York StartUP!: Open to New York City-based businesses in all industries
- Disrupt: Open to business ideas/startups working on AI, robotics, and technology
2. Establish relationships
When you approach investors, the first thing you’ll sell them is you and your team. That’s why having the right people — whether they’re employees or co-founders on your team — can also help you attract investors. Not to mention that starting a business can be an overwhelming and difficult process and having a business partner to share the workload and decisions can make it easier.
When it comes to networking and building relationships with investors, CEO of Arcweb Technologies Chris Cera says, “It’s tempting to give the answer they want to hear instead of the honest answer … Just be honest.” It may also be worth connecting on a more personal level and not talk business all the time.
3. Build your reputation
Besides having a personable and authoritative online presence, you also need to build a reputable image behind the scenes. Investors are attracted to founders who have gained the trust of banks and financial institutions. It’s one of those Catch-22 situations because business owners wouldn’t need investors if banks were already willing to loan them money.
However, some startup businesses need more than funding to get launched, and that’s where the right partners can help. Investors also bring their useful connections, expertise, and knowledge of the industry to the agreement, which can be more important to the success of the business than funding alone.
4. Connect and network
The likes of venture capitalists and angel investors are very busy people, and they may not always have the time to sit down and socialize. But you can still try. When you attend seminars and networking events, make sure to do your research and seek potential investors who share your interests and beliefs.
Interacting with like-minded investors will make it easier for you to engage them and ask for advice. And you may also want to narrow down your potential investors based on where you are on your business idea. If you’re in the initial stages, look for investors who are known for supporting small businesses.
5. Be prepared to offer return on investment and negotiate
Let’s face it: Investors will not be giving you money out of the goodness of their hearts. Yes, they believe in you and your product. But first and foremost, they want to make a return on their investment.
Angel investors may offer funding and mentorship or coaching for royalty or a percentage of your company. And venture capitalists may want control of your business in exchange for funding and access to their resources. So, before you approach investors, be sure to anticipate such offers and have flexible options for you and them.
Set your business up for success
To attract investors, start with a well-researched business plan. Back up your claims with market research, profit margin projections, and case studies, if applicable. And emphasize why the market needs your business. You should also detail how much money you’ve invested already and how much capital infusion is still needed to take your business to the next level.
If your first, second, or third pitch didn’t produce the results that you were hoping for, keep working and making connections. Learn from your mistakes. Take the feedback from investors and use it to improve your product or pitch and try again.
Remember that you are the representative of your business. Attract investors by making them believe you are worth their time and money. And take the time to build a personal brand that will help you stand out from your competitors.
While you’re busy focusing on raising money, leave the rest of your startup woes to ZenBusiness. We’re here to help you launch your startup, and we have plenty of resources to guide you every step of the way. Let our dedicated team at ZenBusiness handle the details of your startup while you focus on moving your business forward.