How to Find Equity Investors?
Finding equity investors is an important part of running a business. Many entrepreneurs start companies with personal loans or grants from friends, but equity investors can help take a company to the next level. There are drawbacks to raising equity financing; most significantly, you will have to give up an ownership percentage in the company. However, equity investors can often be helpful board members who bring industry experience and contact to your business.
Other People Are Reading
Instructions
-
-
1
Develop a detailed business plan for your company. You may already have a business plan, or at least an outline of one, but equity investors will require substantial details about your operations before funding your business. Include an overview of the products or services your company offers; a description of the industry and competitive landscape; the background and experience of senior executives; and financial projections.
-
2
Make financial projections. The financial projections must be concrete and should include the assumptions you have made regarding market share, growth in existing customer accounts and the acquisition of new customers. The business plan should also describe how the funds will be used, how quickly you think the company will generate a return for investors and what the exit opportunities are for the business.
-
-
3
Develop a list of angel investors, wealthy individuals and venture capitalists that you believe would have an interest in providing equity financing for the company. Your business lawyer can help you develop a list of appropriate investors. Spend some time reading the websites of different venture capital firms before contacting them to make sure your company fits within the size and industry parameters of those funds.
-
4
Email or call the investors on your list to try and set up meetings with them. The investors may require some high-level information about your company, such as its sales, profitability and major customers. After they have reviewed the preliminary information, the investors will most likely want to see your business plan.
-
5
Meet with the investors to discuss your business in person. They will likely have numerous questions about your business plan, and they will likely be very focused on your growth projections and exit opportunities. Be prepared to talk about your business in detail.
-
1
Tips & Warnings
There are numerous websites that can provide you with a list of venture capitalists and angel investors in your specific area. One widely used source is vFinance.
Equity investors will ask for a meaningful ownership stake in your company in exchange for equity financing. You should have a justifiable valuation in mind as well as how much ownership you are prepared to give up before entering the meetings with potential investors. You should not furnish any written materials to potential investors until they have signed a confidentiality agreement, which obligates them not to disclose confidential information about your company to outside parties. Ask your lawyer to draft a confidentiality agreement before approaching various investors.
