If you’re planning on starting or maintaining a business, you better be prepared to pay for it. Some business owners save for years, others borrow banking institutions. But there are alternative options to get capital, namely, through investors.
Investors ensure the lights stay on throughout the work week, and that every employee can go home with a check, but finding the right investors isn’t always an easy task.
So how exactly does one find investors for a business?
Where to find investors for a small business
Searching within your network
You may think, “I don’t know any investors!” but you would be surprised. Your friends, family, former professors and classmates, and even ex-coworkers could be potential investors. Since you already have an established relationship with them, it may be easier to sell them on your business idea.
Be careful- you may be personally close to many of these people, so it’s important to draw clear boundaries. Be very clear about the risks involved with a startup, for instance, that they may not receive their investment back. Above all, never let your business or the money get between your personal relationships.
Finding one or two investors to pledge a few thousand dollars can be a crapshoot. Getting a few dollars from a thousand or more people online may be more achievable. Today, there are dozens of different platforms that allow you to crowdfund, such as Kickstarter, IndieGogo, GoFundMe, Patreon, and many more.
When taking the crowdfunding route, businesses need to be mindful of the promised product or service. Backers (the investors on these platforms) will only invest when they see a potentially profitable and feasible product. When you abuse that trust and fail to produce on that promise, your brand will likely experience an overwhelming backlash.
Coworking is ideal for networking and collaborating with like-minded business owners. Coworking spaces are known to have dozens of businesses, many of them startups. At the next Lunch & Learn or networking event in your coworking space, introduce your startup team. You may find your next investor there.
Investors aren’t the only people you’ll find in coworking spaces. It’s not unusual to meet a potential business partner just down the hallway or in the lounge. Best of all, coworking spaces contain entire communities of professionals and entrepreneurs. More than funding, you’ll find a group of supportive mentors willing to guide your entrepreneurial venture.
Startup incubators and accelerators
No man is an island. Even if you have some funding already, that doesn’t mean you have all the tools to ensure your startup succeeds. That’s where incubators and accelerators come in. Incubators connect companies with angel investors, mentors, and entrepreneurs to help them grow. Accelerators are similar, with the primary difference being that accelerators operate under a set timeframe.
Incubators and accelerators have the added benefit of training and guiding business owners along the way. They’re not just dumping funds into a business- they’re helping it grow and scale. Business owners learn about the common pitfalls and mistakes of early startups, so they are better positioned to use the funds they receive.
Private Equity Firms
Private equity firms are considered one of the most reliable paths to getting funding, especially early during the development phase. Within a few meetings, you could pitch your idea and receive anything from thousands to millions of dollars.
Once your startup takes off and begins to grow, your business will need to sell the private equity firm’s stake. Check out Wall Street Oasis’ Company Database to find thousands of different private equity firms.
Getting off the ground
Funding is just one part of starting and running a business. But it can also be the most difficult part. There’s a lot of competition from other startups looking to get a piece of the action, so your brand and idea need to stand out.
First, focus on your elevator pitch. You need to have a great idea and be able to present it to others succinctly and effectively. If your elevator pitch is lacking, investors won’t believe in your idea enough to invest. Even with a great pitch, you need to understand how investors think. Tailor your pitch to each investor with these tips.