How to Find Business Investors
One of the most important aspects of running your 388hero business is finding funding. Between venture capital, traditional bank loans and online crowdsourcing, there are now more funding options than ever before, but it’s critical to choose the right type of investor.
Benefits of business investors
The biggest benefit of finding a business investor may be obvious: They give you money to run your business.
Businesses need capital to grow, and working with business investors means you don’t have to grow the old-fashioned way – by building your business slowly, brick by brick. Instead, you get a cash injection and your business can expand rapidly.
This is most notable with some Silicon Valley startups. Many prominent technology companies needed massive amounts of cash quickly in order to scale their offerings and meet immediate demand.
However, finding funding isn’t as simple as convincing investors to give you large amounts of cash. Seeking investment means trading something for the access to funding. With venture capitalists and certain angel investors, that can mean equity in your company, which in some cases could mean that they have decision-making power on major company issues. With banks, you’re borrowing money, so you’re paying a premium, or interest rate, on the amount of money the bank lends you. This also has strings attached, as many banks want to know how you plan to use your loan before they issue it. With online crowdfunding platforms, you may be trading inside access or even equity for funding. [Read related article: Private Equity vs. Venture Capital: What’s the Difference?]
Working with investors is a great way to take your business to the next level, but it’s a trade-off no matter who provides the money. When seeking funding, you need to weigh your options and consider what you have to give up to get the funding you need. This doesn’t have to be a cutthroat approach; it’s more of an important distinction to understand in order to approach the funding with a successful mindset.
How to find a business investor
Finding investors can be one of the biggest challenges of starting or running a business. In general, it’s best to start small and move toward bigger options later – in terms of whom you seek fund from as well as where you look for funding.
As a small business or startup, look to your local community first. Cities and small towns are constantly developing business initiatives to get businesses to grow locally. If your nearest city doesn’t support the industry you’re moving into, spread your search a little at a time until you find one that does. Depending on your business type, you may have to go to where the money is.
Once you have a business concept, a product or service, and a plan, you’re ready to start looking for funding. Here are five ideas to help you search for a business investor:
Work with friends and family. Start by trying to find funding from your friends and family. This can be the best option for you to get your business up and running without proving yourself to an outside investor.
Look for private investors in the community. Oftentimes, the best place to look for help growing your business is your own community. Look for local business leaders and investors. Work with any pro-business organizations, and network and develop business relationships with the major influencers in your community.
Work with a local bank. Depending on how quickly you want to scale your operations, applying for a loan with your local bank can be a great way to build community relations and find good funding options.
Seek out angel investors. If you’ve exhausted the previous options for finding funding, look outside your community for angel investors and other private investors in your industry. Find areas around the country where your industry is thriving, and contact business leaders in those areas.
Work with venture capitalists. This is usually the final stage in a new company’s funding growth, but it isn’t a necessity for all companies. If you run a stable, successful small business in your community, you likely don’t need to apply for funding with a venture capitalist. However, if you have a successful business idea that would benefit from extremely fast scaling and high amounts of capital, then working with venture capitalists is a good option to pursue.