Starting a new business is an exciting time, yet too often new business ventures are unable to succeed because of lack of capital in the first two years of operations. Rarely does a new business owner have the personal assets or funding sources to start, grow, and maintain operations when starting up a new company. It may be critical for you to find investors for the capital necessary to keep the business operating the first few years. Unfortunately, few people know how to get those investors. These tips can help you not only locate investors for your startup but will explain methods on how to encourage those who are interested to invest money in your startup.
Develop a Business Plan
The first step in getting investors for your startup is to create a good business plan. A business plan should clearly explain what your business does, who your target market is, projected sales for at least the next five years and any industry reports that may indicate how your idea may meet an unfulfilled need. There are many online templates available that make it easy for you to create a business plan but keep in mind that it needs to appear professional. It should (of course) not be handwritten, but typed and put together in a folder or binder when you present it to a potential investor. You should also know the plan thoroughly and be able to answer any questions the investor may ask when you present the plan to them.
Start with Friends and Family
The best place to start presenting your business plan is to your friends and family. However, it is important that when you present your plan, you treat your friends and family as you would a business professional. Dress in business attire and present the plan as you would to a business person you do not know. Answer any questions they may have and keep the conversation focused on the business plan, not on the big game, your cousin’s latest job, or any other personal matters that might come up. Many times, friends and family are reluctant to mix money and personal relationships, but by discussing the matter with them with a business-like attitude, they may be more willing to keep an open mind. Be sure that your friends and family will receive the same benefits as an outside investor, such as stock options or repayment of their investment with interest.
Consider Working with an Expert
If you have never successfully started a company, you may need to add someone to your startup team that has experience in order to attract investors. Most investors want to put their money into companies that they know have a chance of giving them a big return on that investment. Therefore, if you can afford to hire a consultant who has had success with startup companies, you may have a better chance at convincing an investor that you will succeed. Understand that an investor is not happy until they begin to see money coming back to them, so anything you can do to better position yourself to succeed is beneficial.
Demonstrate Why Your Startup is Different
Investors want to know why your startup is different than that of your competitors. If what you plan to produce is a trade secret or a patent, you will have much more success finding investors as this would indicate a new invention or innovative idea. However, for many startup companies, they are not necessarily developing a new invention, but are creating a business that is similar to others. In those cases, it is critical to explain to an investor why the product or service you offer is better, different, or meeting an unfulfilled need in your community. By demonstrating to an investor that your business plan is unique from the competition, you will have a better chance of convincing them that your company is worth their investment.
Every successful company began with someone’s idea and the majority of those companies succeeded because they were able to present a business plan to investors that convinced them that the project or idea would meet a need that was not currently being met. By keeping a professional attitude and developing a business plan that completely and competently describes your company, you will be able to begin taking the steps to making your dream become a reality.