How to Attract Startup Money for Your Business
Inventors and entrepreneurs with great ideas for business startups may be shocked when it comes to finding funds. The chasm between a startup idea and the consuming public is filled with product tests, meetings with venture capitalists and efforts at regional distribution. Unless you have personal finances to fund production and distribution, you will need to attract startup money for your new business. The key to drawing investors to your business is presenting your financial needs honestly. By maintaining transparency throughout the initial funding process, your business startup will be tested among industry experts before products ever reach consumers.
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Instructions
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Focus your business plan on demonstrating what startup money will mean for your business in a tangible way. For example, an electric-vehicle maker should show how many cars can be produced with an investment of $100 million. Break down your funding needs into smaller parts, showing the costs of research, development and implementation paid by investments.
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Conduct open houses of your workshops and offices every week to show potential investors where their money is going. Publish advertisements in local business magazines and newspapers about these open houses to hit your target market. Clear time out of your schedule to show investors around rather than relying on employees to add a personal touch.
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Offer potential investors and clients easy access to startup information through a well-designed website. Use the website's main page to offer a testimonial about the product as well as a video of the product or service in action. Create tabs for product history, business plan, contact information and company news to make the website more usable.
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Outsource creation of product prototypes to an experienced design firm like XPress3D. Firms that specialize in rapid prototyping use computer-aided drafting, CNC machines and expert finishing to create prototypes that look like finished products. Place a handful of prototypes in your office as well as your waiting area while storing one for visits with investors.
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File for an initial public offering (IPO) through an investment bank like J.P. Morgan. A successful IPO will attract investors willing to put up their hard-earned money in exchange for shares in your company. Your underwriting bank will help determine the number of shares, high and low share prices, and offering date. Examine the Securities and Exchange Commission (SEC) page about IPOs before filing for underwriting to appreciate the risks of initial public offerings.
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Research venture capital firms specializing in your industry to attract startup funds for your business. Examine the extensive listing of venture capital firms on Venture Capital Access Online to pinpoint your search for startup funds to a handful of firms. The investment of funds by venture capitalists in your business startup will inspire confidence among skeptical investors.
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Publish biographical pamphlets of directors, advisors and prominent clients for your business startup for public consumption. Automakers, medical suppliers and architectural firms can leverage their connections to industry luminaries to attract investments by showing why these figures work for their companies. In addition to print versions of the pamphlets, send electronic versions of the pamphlets with each investment inquiry to spread the word.
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Tips & Warnings
Show prospective investors and customers that you are serious about your startup by investing your own money. Business owners who draw on savings, retirement funds and credit cards show confidence in their products. Your business plan should include specifics on your personal investment as well as your ability to pump additional money into the venture in the future.
Set aside your fear of rejection from friends, family and colleagues as you try to attract startup money. Invite loved ones to your home and present your startup's product or service to get your sales pitch down. If you ignore your personal network when attracting startup money, you may be leaving valuable advice and money at the table.
Resources
- Photo Credit Photo by Alvaro Canivell (Flickr)
