How to Find Investors for a Start-Up Business
The most common ways of funding a start-up business, are often referred to as the 3 F's: Family, Friends and Fools! In truth, those are the best ways to get initial investors for a start-up business. They are people who know you and know your capabilities and will trust you to use the money wisely to produce a return on their investment. If they are not an option, or if you have already used their first round of funds, you need to find other investors.
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Things You'll Need
- Business plan
- Financial projections
- One-page summary
- Business cards
- Elevator statement
Instructions
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How to Find Investors for a Start Up Business
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Work out how much you need and be realistic in your assessment. It is easier to ask for a larger amount the first time than to go back and ask for more. Not only does the latter inevitably raise the question of what you did with the money, but it also calls into question your ability to budget and keep to a plan. You also need to decide how you are going to repay investors: Are the funds to be loans with an interest rate proportionate to the risk (10% to 25%) or will you give an equity stake in the business?
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Write a professional business plan, including your target customer base, marketing strategy and five-year financial projections. You should also have a one-page summary of the proposal that you can use to get initial interest without people having to read the whole proposal.
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3
Look for potential investors in the network of people you know. Not just friends and colleagues, but people you come into contact with in the course of your everyday life: dentists, attorneys, doctors--these people in high-paying professions often act as angel investors to new companies. Remember that most angel investors invest in local companies--they want to be able to monitor progress.
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Talk to your banker and CPA and ask if they have anyone they can recommend for you to approach. If you are a member of the local Chamber of Commerce, Rotary Club or other association, make sure you tell everyone there about your venture and ask them to spread the word. Have business cards ready to hand out and have an elevator speech ready--this is 30-second explanation of your proposal that will tell people what you intend do, how you will do it and the benefits of investing.
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Do an Internet search for phrases such as "angel investors" and "start up funding" and check out sites such as Prosper.com that act as a clearing house for investors and businesses needing funds.
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Persevere in your efforts--you will probably get turned down scores, if not hundreds, of times in your search for investors. Ask everyone who does turn you down if they know of anyone who might be interested. Above all, don't get disheartened--if your business idea is good enough, someone will recognize that and invest in it.
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Tips & Warnings
Remember to include your exit strategy in your business plan--investors want to know how and when they get repaid.
