For a new company, it is realistically hard to find an investor that will provide you with the capital that you need to grow. Many investors want to see proof that your idea actually works and that there is demand for your products and services. They want to see that proof in your financials.
From the article “How to Secure Angel Financing: Learning from Black Orchids Interior” an entrepreneur who just received an investment from an angel investor gave this advice based on what she went through to secure the financing:
“Grow your business to break even first. Entrepreneurs that have built turnover to breakeven and have a good business plan generate a higher valuation at the point of investment. Therefore you will not be expected to give as much of your equity shares away in exchange for investment.”
But it can be done, though it will not be easy. And you need to prepare your business and yourself for the tough road of finding investor. Below are some steps to taken when looking for an investor to finance your startup.
Before going out to look for investors, the first step is to know what investors are looking for. Know their procedures, processes and factors that they are looking for that make them want to open their wallets.
Write a business plan.
Prepare a business plan. You need to be able to convince the investor that your business has huge growth potential, has a wide market for your products or services, and excellent profitability prospects. You need to have a solid financial plan.
Build an excellent reputation.
The investor will be putting money in YOUR business, and he/she needs to have faith in you. They must believe that you have the right character, temperament and skills to get the job done.
Start to network – intensely.
You may be able to find someone who can help open doors for you. You may find an investor who may be interested in your business but does not trust you and gets the impression that you can’t do it. But if someone they trust can vouch for you that you are the man (or woman) for the job, then they may overlook their initial hesitance and support instead.
Start researching about angels and angel networks.
Angels are investors that focus on providing seed capital, anywhere from a few thousand to millions. They are willing to go where venture capitalists, for example, will not touch with a 10-foot pole because the business is unproven and risky. However, some investors and angel networks may have their preferences – e.g. investing only in businesses with hard to replicate technologies and patents.
If they hesitate, ask them to become your advisor.
Some investor may not be convinced about the business you are pitching and may have doubts about you. Why not offer the chance to be part of this venture in an advisory capacity. This will allow them to be part of your business and realize its true potential. Having them near you will also allow them to know you and see your passion, commitment, dedication and smarts. Then hopefully, they will become more willing to be part of your business and invest in it.
Be realistic in your search for an investor.
Searching for an investor can be frustrating, time consuming and even morale crushing. You are putting your whole self, your brainchild and vision up for judgment of others, and whether you are worthy of their support or not. Worse, some investors may be arrogant, tough, and even insulting. It is NOT going to be easy.
If you’ve watched any episode of Shark Tank where entrepreneurs present their ideas to a panel of investors, (highly recommended when you are looking for investors) more often than not, you’ll see heart-tearing rejections. For some, getting investor’s money can spell the difference between the realization and end of their dreams. Be prepared as you put yourself out there looking for an investor.