Finances shouldn’t stop you from the dream of building your own company. Here are five venues where you can find investors for your start-up.
There are many websites that specialize in linking investors to entrepreneurs. But with so many sites available, how do you know which one is right for you?
First, determine what type of funding you’re looking for. Do you want to use investors that will fund you in exchange for equity in your company? Or are you looking for a loan that can be paid back?
Then, determine what type of relationship you want with your investors. Some companies offer more than just financial benefits. Let’s take a look at two sites: one that pairs you with equity crowdfunders, and one with private (angel) investors.
CrowdfundX, a digital crowdfunding agency, brings accredited and non-accredited investors together to help fund private companies.
CrowdfundX runs campaigns for their clients on various equity crowdfunding platforms. First, they design a marketing campaign around your story. This can include what your product or service is, what motivated you to begin and why investors should consider you. Once your story is crafted, they identify and target potential investors based on market research and campaign data. Via social media (Facebook ads, for example), they entice people to invest. If you already have fans or customers, they can target these individuals as potential investors. They can also partner with influencers such as bloggers who have access to thousands of subscribers who might be interested in your start-up.
According to CEO Darren Marble, “Creating a marketing campaign is similar to creating a story.” Said Marble, “An entrepreneur needs to create a phenomenal story to tell investors, something that will inspire and motivate them to invest.” Tell them what problem you’re trying to solve, what inspired you to solve it and why this idea is meaningful to you. In Marble’s eyes, “overlooking storytelling is a huge mistake people make when beginning their start-up.”
The great thing about equity crowdfunding is that anyone over 18 around the globe can invest. The average person invests $1,500, with a typical minimum of $500. This opens up a huge market for you, as there are thousands of non-accredited investors with small amounts of capital that can add a lot to your bottom line. Marble said that many of these smaller investors are engaged with the start-up and offer many non-monetary benefits. Often investors are loyal fans or customers who want to see your company succeed and can help promote the brand. This type of loyalty and enthusiasm is something you might not get from a handful of larger investors, but can get from thousands of smaller ones.
Private (Angel) Investors
Private or angel investors provide funding in exchange for partial ownership in the company. Often they are successful entrepreneurs who have knowledge on start-ups and are willing to take risks.
Nick Braun, founder and CEO of PetInsuranceQuotes.com, used AngelList to connect with three angel investors for his start-up business. He filtered investors by role, industry, location and investment. This saved time and allowed him to create a list of potential angel investors who had experience in the pet and insurance industry, as well as entrepreneurial skills.
Braun recommends using angel investors instead of bank loans or venture capitalists because of the mentorship you get from them; investors can help your business grow, not just write a check. His investors have made a huge impact on his business, helping him make strategic decisions and introducing him to new partners. According to Braun, “Money is a commodity and there is plenty of it out there, but if your investor can’t add value without money then it’s not worth it.”
Business incubators are start-up hubs or programs that offer resources such as guidance from fellow entrepreneurs, office space or market research in exchange for a portion of the company. It’s almost like a school.
Some business incubators will offer seed money upfront. Others bring investors to you so you can pitch your idea in front of a group. Y Combinator offers $120,000 to a large number of start-ups twice per year. They also have a fellowship, which gives entrepreneurs $20,000 and 8 weeks in the YC community to grow their idea into a start-up. This type of fellowship is perfect for those just starting out.
Family and Friends
Check with the people closest to you. Family and friends might have money they plan to invest in someone, so it might as well be you! They want you to succeed and might give you a better offer because they know and trust you.
Be cautious with this one, though. Make sure expectations are clear, and put everything in writing. No matter how badly you want funding, it’s not worth losing friends or family.
Local companies or your alma mater probably host networking events that allow you to meet individuals in your industry. You’ll get in front of people who are looking to invest or know someone who is. This probably isn’t the best time to pitch an idea, but forming meaningful relationships with people there will give you the opportunity to pitch your idea down the line.
Cities or larger companies sometimes host start-up events where investors give lectures or participate in panels. Often they are willing to give advice or listen to your ideas. Even if you can’t pitch your idea, just making the initial contact will be positive.
Preparation + Opportunity = Success
You need to convince and reassure your investors that you’re worth investing in. Always be prepared with an elevator pitch and a business plan. Ideally, you should also have a tangible, working model of the product or service you’re providing. To come across as knowledgeable and passionate, prepare yourself for the tough questions.
Investors will usually bet on the jockey, not the horse; they want you, an enthusiastic, hardworking and dedicated entrepreneur. But being all of these won’t do you much good without a clearly articulated plan. Be prepared when the opportunity arises, and you’ll be more likely to be successful.
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