More often than not, you will need money for your business to run and operate the way you want. In such situations, you may not always get the desired amount of money from your bank. Therefore, you will have to look for alternative sources for funding. While this is one of the most significant reasons for businesses to turn to outside investors, there are several others for that matter.
Raising the required capital is ideally the most common and significant challenge faced by the startups, but occasionally even the most established small business may also need some funds every now and then, which is when they need to turn towards the outside investors.
The outside investors can come in different forms as names such as:
- The angel investors
- The venture capitalists
- Friends and even
- Family members.
When it is hard for you to get a business loan from traditional sources such as the commercial banks, these outside investors really turn out to be an ‘Angel’ to your company. However, this may mean that you will have to share ownership with them but that is better than sharing standard business credit.
However, finding the best investors for your business means real ‘business’ and you will have to be strategic and cautious so that you do not end up with the money you need but as a result lose your ownership and control over your company.
It is for this reason you should find out some time to research on all the available sources including the outside investors, traditional banks and financial institutions as well as all those online money lending sources such as Liberty Lending US and others so that you can make a fair comparison and make the right choice.
Here are a few tips that you should follow.
Choosing the appropriate investor
Most of the business owners tend to make the common mistake of using the wrong words to define the specific type of funding that they are looking for. Therefore, make sure that if you are looking for an Angel Investor you do not say venture capital and when you want friend or family funding, you say angel investment.
This is because every form of investment comes with its characteristic features and consequences. If you do not know the differences, you will end up on the losing side.
The right friendly approach
You will be better off when you do your research before you finalize on an investor. You will also need to maintain a different approach when you talk to a specific investor.
For example, when you want funding from your friends or family the beat way of approach is not to ask them directly whether or not they will invest in your company. Instead, you should follow this more effective process:
- Describe the type of business you are into or intend to do
- The future prospects of it
- The plans that you have made to go ahead
- The areas wherein you are stuck
- The need for your funding and most importantly
- Ask them whether they know anyone else who could help you in this regard, not them.
This will save you from the embarrassment of direct denial from the person you intend to get your funding. If you can explain things well, the person will be interested himself and will be willing to make a contribution to your business according to their ability. If you want more money, ask them about anyone else they know who might also be interested to help you out.
Talking to an Angel investor
If you want to borrow from the angel investors you should follow these steps.
First, you should identify your targets carefully. This is always the best way to put the best foot forward. Make sure that you list a few names of reputed angel investors or angel groups that may be interested to invest the required amount in your business. While you make the list make sure that you consider a few specific points such as:
- Your industry
- Your stage of development and
- Your region.
This is important because different Angel investors will have unique set of interests, personalities and identities. Apart from difference in their preferences, they will also have different abilities to invest. Therefore, they will too consider investing in your business by judging it based on different parameters such as:
- Your business nature
- The stage at which it is now and
- The amount required.
Most of these Angel investors will have their own websites and most of these websites will talk about their preferences. Typically, Angel investors will not want to deal with businesses that do not fall into their category or they do not know much about the business nature and type. Angel investors expect you to know everything about your business.
When you look for the Angel investors, try looking up at The Angel Capital Association that lists all investors and investor groups. You will get better insights in different aspects such as:
- The statistics
- Advice and tips and
- General information.
Alternately, you can also look up at the websites for local leads or industry-specific leads. If you wish you can also register with different search sites that will allow you to see the profiles of different angel investors along with the listings of different angel groups.
To sum up
When you are looking for outside investors for your business, make sure that you do not do anything in bulk. That means when you are looking for funding, avoid the general email templates that are available in large numbers on the internet like the plague.
If you are looking for a few serious investors, do not expect them to read your emails or executive summaries or even watch a pitch. They will feel that you have sent these things in bulk to different other investors and therefore even not read your business plan.
Therefore, make sure that you spend some time on research before you finalize on a particular investor for your business to run properly.