We often see startups failing due to a few reasons; one of which is lack of investment. Despite a business having all the potential to succeed, they are presented with its demise due to not having enough capital to spend on marketing and refining its product. Enter investors. What they lack in innovation, they fulfill with money. And the startups get what they want, in return for sacrificing a specific equity or share to the investors.
However, locating investors isn’t an easy feat. As the idea of investing is associated with money, no one likes to be the sacrificial lamb. As a startup, your objective is to convince the investors with a compelling product and strategy that they can make profits with. In this article, we’ll go through the best methods for locating investors for your startup.
Locate Potential Family Members
You must have a rich uncle or grandparent who believes in your cause and persistence. Locate them. The more business-minded they are, the better. Locate their pressure points and pitch your idea to them. While it may fail, you have a better chance of securing investment from your family members without showing any past results than with any external investors.
Your family members and friends are the ones who’ve seen your hustle to get your product or service out. It’s possible that some of them might also be inclined to join your venture. Consider arranging a group dinner or getting together to pitch your idea to them. If anyone is interested, reach out.
Online Fundraising Platforms
Startups are booming across the globe. With them, fundraising platforms are also becoming increasingly popular every year. These platforms attract investors, entrepreneurs, and angels alike to connect and communicate through their services. Typically, as a startup, you are required to put in your idea and business details including past sales, revenue, and scope of investment on these platforms. Short term rental investments often get fulfilled through these platforms. They secure investments from interested individuals in the real estate market to build their portfolios. The investors are notified about your venture in an engaging manner and are given an opportunity to invest in your startup.
There are several types of fundraising platforms available in your spare. While some of them thrive on being a donation-based platform, some are more inclined towards being a lending or equity portal. Depending on your preference and situation, choose the platforms accordingly.
Dedicated investors who have a high net worth, resources, and a great business background are called angel investors. Angel investors, typically, are more inclined to contribute to an extent that no other investors can dilute their equity. However, angel investors expect more equity in return for their investment.
Most angel investors are experienced business persons. As they have a more logical money-making mind, they only invest in businesses that have the potential to grow and can prove to be worthy of their investment and efforts.
Although subjective, the main drawback of having an angel investor is that they expect to have a voice in day-to-day business. While it may be great given their experience and resources, it can prove to be detrimental for some businesses.
In contrast to angel investors, venture capitalists typically step in when a startup is growing and is in need of serious money to sustain its growth. More often than not, venture capitalists support the startups when there is a change of plan and it might get risky in the long term.
However, venture capitalists don’t invest their own money in startups. They convince the investors to fund your startup through their credibility and experience. For seasoned startups, venture capitalists are a great source of investment. Especially when the products or services can be a game changer.
As venture capitalists invest in matured startups, their investment is typically higher than that of angel investors. However, they also expect to have a say in day-to-day business.
If you’ve already started with your startup, you must’ve made some connections with individuals in your industry. If not, consider making connections with businesses and decision-makers. Also, consider meeting people who are trying to get into your industry but aren’t able to get a breakthrough. You can find such persons at business events and webinars.
Attend Mutual Events
As mentioned, events are one of the great ways to locate investors for your startup. However, when attending these events, whatever the movies say, don’t pitch your ideas then and there if you’re not expected to address them. Rather, consider asking for help. If you reach out to investors who are present with your idea and ask for help, they might become interested in your business and value your proposition.
Social Media Outreach
Although not very effective, business-centric social media like LinkedIn can be a great platform to locate investors interested in your industry. However, it’s advised that you don’t reach out to them through social media. Find their email address, and contact details, and pitch to them directly. Use social media platforms to gather as much info about them as possible. Reaching out on social media often radiates immaturity and a lack of enthusiasm.
Emails are more professional than social media platforms. Even investors expect to be reached out through email for opportunities. Finding their email address may be a bit challenging, but it has become easier in recent years. However, if possible, reach out to them after they’ve personally offered you their contact details to avoid being neglected and flagged as spam. Try to avoid pitching your business in the very first email. Let them acknowledge your existence and then go for the cream.
Join Accelerator Programs
Serious entrepreneurs join accelerator programs to humble and train themselves for investment opportunities. These programs, after a specific training period of business advice and management, introduce you to investors and let you pitch your idea in front of investors. Verify the track record of each program before choosing the one best fits your requirement.
The Bottom Line
The best investors are your family members, friends, and angel investors. While they get on board by relying on your vision, venture capitalists join the board after you’ve gained significant traction and need to venture into riskier propositions. The best ways to reach investors are social media, email, and accelerator programs.