Who Will Invest in an Idea?
An idea is the first step in creating a business or nonprofit organization that can grow. But the transition from idea to practical, functional plan usually proves impossible to overcome for the majority of entrepreneurs. Getting money for an idea isn't easy, but it will be less of a roadblock if you know about possible sources of investment.
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Family and Friends
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Family members and friends are among the first people you should consider when you have an idea that needs investors to get off the ground. These are people you already know who are likely to understand your work ethic, expertise and practical business knowledge. They'll also be able to follow your progress through casual contact, which makes them more likely to invest with little up-front information than others who don't know you as well. Even if family and friends can only supply a small initial investment, it might be enough to turn your idea into a business plan with more details that will appeal to bigger investors down the line.
Referrals
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Referrals are people your friends and family introduce you to for purposes of soliciting an investment. Because you have a personal point of contact with these potential investors, you don't need to worry about registering with the Securities and Exchange Commission to comply with securities laws for soliciting investments. Referrals can be colleagues, wealthy individuals, mentors and extended family who will accept your mutual acquaintance's recommendation about your character and abilities. They can also be people who seek you out after hearing about your idea from a mutual friend, though in most cases you'll need to seek referrals out on your own.
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Venture Capitalists
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If you have registered with the Securities and Exchange Commission, or have them in your circle of friends and business contacts, venture capitalists are another potential source of investment in your idea. Venture capitalists are professional investors who seek out businesses in the early stages of development, before a public stock offering or even much publicity. They might wait until your idea has more details and money behind it, but if you can deliver a strong pitch you may be able to convince one that your idea is a worthwhile investment. Venture capitalists will likely want to draw up legal documents to protect themselves more so than friends, family or referrals.
Governments
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Federal, state and local governments are another source of investments in ideas. Through grants, governments issue money to applicants who have plans for programs that seek to improve the public good. This can include a business or non-profit, especially if it will operate in an underserved community or reduce unemployment by creating new jobs. Government grants are highly competitive so you'll need to be able to articulate your idea well in the grant application. You may also need to find ways to cite your experience and knowledge that gives you a chance to turn the idea into a reality and put the money to good use.
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