3 Methods How To Find Investors For A Small Business

(doylc.com) How To Find Investors For A Small Business - If you want to start a small business or expand an existing one, you need to find money. One way is to attract investors. There are many potential investors out there. However, you need to identify which ones are investing in your business and then put together a compelling presentation. When you meet with investors, remember to answer questions with confidence.

• Identifying potential investors

Ask small business groups. You may not know where to start. It's probably best to start close to home. Meet with other small business owners or visit your local Chamber of Commerce. Ask if they know investors for your company.

Contact the Small Business Administration (SBA). In the US, the Small Business Investment Company (SBIC) program helps small businesses find investors. Over $21 billion in capital has been channeled through this program. Each SBIC is privately owned. However, they are licensed and regulated by the SBA.

The SBIC Directory can be found here: https://www.sba.gov/sbic/financing-your-small-business/directory-sbic-licensees.

For purposes of the SBIC program, a small business generally has a net worth of less than $18 million and net income of $6 million or less. In addition, some companies are prohibited from participating in the program.

Find a local incubator or accelerator. These organizations help startups turn their ideas into a real business and also provide funding. You can find an incubator or accelerator near you by using the National Business Incubation Association directory listing.

In general, incubators help startups or new businesses, while accelerators help established businesses grow faster.

Incubators may not provide direct investment. However, they can help you connect with potential investors.

Check out online crowdfunding. You can reach investors worldwide by using an online crowdfunding site like Equity.net. These websites give you access to hundreds of investors who can help you finalize your business plan and grow your business.

Think of family and friends. People you know could invest in your business as they can see your drive and determination. Remember to approach them like any other investor.

Friends and family, just like other investors, will want a return on their investment. However, you can be more flexible about what you can offer. For example, instead of making them co-owners, you might want to give them free goods or services in return.

You should also consider asking people you know for a loan instead of an investment. With a loan, you don't have to give up ownership of your business. Even if your business fails, you can wipe out a loan in bankruptcy.

Hire a business equity broker. These brokers have networks of potential investors to connect with. You can find a business equity broker online or by speaking to other companies who may have used a broker.

Consider whether venture capital is right for you. Venture capital is a term used to describe a variety of investors including private equity firms, venture capital firms, and angel investors. Although they are different, they have something in common:

You take big risks for potentially big financial rewards. Accordingly, venture capital usually invests in sectors with high growth potential, such as technology or biomedicine. Very few companies qualify for venture capital funding.

You are actively involved in your company. For example, they will likely request a seat on your board of directors in exchange for investment capital. However, they are often experienced in your industry and can help you grow.

They have a longer investment horizon than other forms of financing.

Find venture capital investors. Check out online sites like Angel Capital Association, Angel Investment Network and Funded.com. Investors use these websites to find companies to invest in.

The Angel Capital Association has a directory of accredited investors. You can search by region or state. Links are provided to enable you to visit the investor's website to learn more about them.

• Putting together a presentation

Run the numbers. You need to know how much money you want. If you need a small amount, you may just seek out an investor. However, if you need a lot of capital, you need to know that too. Calculate how much money you need for your small business.

Also consider how much of your equity you are willing to give up in return. Investors don't lend. Instead, they take a share of the property for money. You have to come up with something sensible.

For example, if your company is worth $100,000 and you want $25,000, you will need to give up about 25% of the company's equity.

Update your business plan. Your investors will want to see your business plan, which you should already have in place if you are an existing company. The plan identifies your market, your competitors, and provides financial projections for five years.

Update financial information to keep it current.

You should also summarize the summary of your plan. Investors often skip other parts but focus on the summary, so spend more time on it.

Make the business plan colorful and add graphics so the information is easy to digest.

Research the investor. You need to know if a potential investor will be interested in your company. Many investors only focus on certain industries, so figuring out their focus ahead of time will save you time.

Check online which companies they have invested in.

Check out their LinkedIn profile to see if you know people in common. If so, ask if the investor might be interested in your company.

Ask for a meeting. There is no way to reach an investor. If someone recommended the investor to you, include the name of the referrer in your email or when you call. Alternatively, you can send your email to the referrer who can then forward it to the investor.

Communicate clearly what you do in the body of your email.

State the age of your company. Are you a startup? Have you been in business for ten years?

Identify any other investors you have worked with. For example, an investor might have given you seed capital five years ago.

Provide dates when you are willing to meet. Try to be as flexible as possible.

Proofread your email to make it look professional.

Attach something to show the investor your business. For example, you could create a short video showing your products or services.

know your story Investors don't just invest in one company. You are also investing in one person - you. Accordingly, they will want to know things about you. You must be able to explain:

What about your background brought you to this point?

How have you benefited from your previous business experience? Be prepared to point out specific achievements.

Prepare for general questions. You can't anticipate everything a potential investor will ask you in advance. However, there are some general questions to think through:

What was the biggest mistake you made in your company?

How are your competitors outperforming you? Why?

Is something working against your business, e.g. B. new regulations, demographic changes, etc.?

Why are you looking for financing?

What are your long-term growth plans? How do you plan to get there?

Get help from a small business development center. Your nearest SBDC can help you create a business plan, find potential investors, and prepare for investor meetings. Contact the nearest SBDC and make an appointment.

You can find your nearest office here: https://www.sba.gov/tools/local-assistance/sbdc.

• Meeting with potential investors

Make an unforgettable presentation. You'll likely be making a presentation to investors, which can take many forms. For example, you could create a PowerPoint presentation or create a brochure for the investor to flip through. With other investors, you just sit and talk. Regardless of the form of your presentation, it is important that you do not simply repeat the contents of your business plan.

Yes, the investor wants to understand your finances, which is why you have a business plan ready for them to take and read. However, there's no harm in getting creative.

Show the investor your product or service. When you expand a confectionery business, you should have a variety of pastries with you. If you offer a service, you can create a short video that shows your business in action. You need to give the investor a concrete idea of ​​what your company does.

Remember that pictures are more memorable than words. When you create a PowerPoint, don't fill it with text.

Be brief. Your presentation should not last longer than 20 minutes. If you use a PowerPoint, it should not have more than 15 slides. Practice your presentation until it's the right length.

Get advice at the first meeting. Don't jump right in and ask for money. A potential investor needs time to think about your business idea before deciding whether to invest. Accordingly, you should spend the first conversation tapping into the investor's business knowledge.

However, you can subtly inject money into the discussion. For example, you can casually say, "I thought I'd need $130,000 to open a new business in this location, but I'd like to hear from you if you've spotted any hidden costs in your experience..."

Be honest. An investor will not write a check until they have done the due diligence. You will want to take a closer look at your business finances and uncover any misrepresentation you are making. Always be honest in your business plan and in your discussions with potential investors.

Admit if you don't know the answer. An investor will appreciate your honesty.

If you lie to an investor, they will talk to others in their community. They get a bad reputation and can't find investors.

project trust. Potential investors want to see that you have confidence in your company. Avoid being arrogant, which shows you are insecure. Instead, show quiet confidence in the following ways:

Listen. Insecure people chatter all the time and laugh awkwardly to fill the silence. Be ready to listen.

stand up straight Keep your shoulders back when sitting and standing.

Make eye contact when speaking to and listening to someone.

Avoid fidgeting.

Remember to ask investors questions. Every investor participates in your company. Accordingly, you must also check them. Before agreeing to work with us, ask the following questions:

What other projects are you investing in? Check if they are similar to your company or if they are in other industries.

When was your last investment? If the investor hasn't invested in a while, they may not be serious.

How do you want to increase the value of your company?

What factors will you consider before deciding to invest?

How active do you want to be in business? Does the investor want a seat on the board, do day-to-day operations, etc.?

Follow up with the investor. After an initial meeting, say thank you to the investor by sending them an email. They are unlikely to agree to an investment after just one meeting, so you should keep the doors of communication open. A short, professional thank you email can do the trick.

You can also keep the investor updated on the progress of your business. For example, if you're launching a new product, let them know how it's going.

Stay professional when you get rejected. It's hard to say why people choose not to invest in companies. You may not have been a good match for him, or he may have already decided to invest in a similar company. Regardless of the reason, you can control how you respond. Be professional and thank them for their time.

Keep in mind that you might meet the investor later when they are more willing to invest in you. There is currently no reason to burn bridges.

Keep trying. Don't get discouraged if you don't get many offers or if every presentation you give results in a rejection. You probably haven't found the right investor yet. Keep looking because the perfect investor might still be out there.