How to Look for Investors to Invest in a Small Start-Up Business
For small businesses that intend to grow but will not quickly achieve positive revenue, investments rather than bank loans may be the best method of achieving that growth. Bank loans require that your company already be profitable enough to start making payments immediately. Investors, on the other hand, are accustomed to waiting three to five or even seven years before withdrawing their investments and generating a return. Finding these investors is possible, but will take a lot of leg work.
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Instructions
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Write a business plan. Investors will want to see a well researched business plan that includes realistic financial projections and a solid understanding of the market opportunity and customers. Pay particular attention to the executive summary, which is a one-page sales pitch for your business. Also make sure that you can back up your research, and include copies and citations in the appendix. At this stage you should have a proper valuation of your business done, in order to ensure that you are giving up the correct amount of equity in exchange for the investment you are seeking.
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Develop a pitch. Practice giving a 30-second elevator pitch to use on your contacts in order to get them excited about referring investors to you. Also practice giving your presentation, including PowerPoint slides, that explains your business, and the investment opportunity. You may have less than 15 minutes to sell an investor on your business.
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Approach friends, family and colleagues. If you have a genuinely interesting business and business plan, friends and family who want to see you succeed may be a good initial source of funds. Getting them excited about your business will also allow them to convey that enthusiasm to people in their network of contacts who may have investment funds available. Use LinkedIn or other social networking tools to extend your reach.
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Attend networking events. You may start off with the city council or chamber of commerce meetings, or industry networking events and trade shows. Look for the types of meetings and events where there are likely to be people with an investable net worth of $1 million or more. Show them your enthusiasm for your business, and get them excited about the market. Ask them for a meeting in which to present an investment opportunity.
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Contract with an angel investment broker. There are service firms that specialize in helping entrepreneurs find investors. If you're finding less success than you think the business warrants, one of these brokers might have the right contacts to help you. A small business generally needs only angel investment, so look for a service firm that concentrates on angels (individual investors) rather than venture capital.
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Tips & Warnings
Asking for money can be difficult for many people, but you won't get it if you don't ask. Remember that the investor is getting a fair deal and will be charging you appropriately for the service of using their money.
