There are several ways to relieve the stress of raising capital for your business. One of them is finding investors that earn as the business makes profits. Whether you’re a real estate investor or not, you will definitely need to find partner investors for better business yield. And for a startup or small business looking to expand, you don’t have to shoulder the whole load for that business. This post will guide you on how to find investors for your business, be it a startup, and how to develop a good business rapport and connection. It’ll also go over the advantages of securing investors for your business.
First of all, let’s look at why it is beneficial to find investors for your business, or how they can benefit your business
Benefits of Finding Investors for Your Business
The following are reasons why you need to find investors for your business.
#1. Help Overcome Financial Challenges
The first benefit of having individuals invest in your business is that they may assist you in overcoming financial challenges as you expand and grow. This might entail obtaining a bank’s loan approval. While banks are more concerned with things like credit ratings and savings, investors are more willing to take risks.
This implies they may decide to ignore financial savings in favor of innovative ideas and the potential they believe a company has. That’s not to suggest you won’t have to make a strong case and show great ability, because the smartest investors don’t take risks.
#2. Lessen Pressure to Pay Up
Because an investment isn’t considered a loan, you won’t be bound by the same criteria as a loan. This means you won’t be forced to strict deadlines or take advance payments with interest levied on top. Consequently, you won’t have to worry about making repayments, enabling you to concentrate on your business more.
#3. Practical expertise
Finding someone who has followed a similar route in business to you may be quite beneficial. You can benefit from their advice, business knowledge, and experience, among other things. You might also learn from their errors in order to prevent committing the same ones yourself. This will increase your chances of long-term success in operating and expanding your company.
#4. Creates Rightful Connections
Having ideal connections may help you grow your firm and make it successful, and an investor can help you build those connections. Their previous business success is likely to have resulted in a network of strong relationships, some of which may be useful to you. Their choice to invest in your company shows that they believe in it and want it to succeed, which makes them more likely to gladly forward some of their top connections for you to meet and develop business ties with.
#5. They Motivate and Inspire You
Partnering with a successful investor who has accomplished great things in their business might inspire and drive you to do the same. An investor can help you keep going, build on your success, and reach your goals by providing moral support in addition to financial assistance.
#6. Increase Stakeholder Trust
Finally, getting an investor may boost the trust of your clients and consumers in your firm and its prospects. Owners, workers, investors, rivals, and consumers are examples of stakeholders.
How to Find Investors for a Business
Your company requires funds to expand. The first investors (after yourself) are usually individuals you already know. However, even after you’ve exhausted your contact list, your company could still expand. Isn’t that exactly what everyone wants? Yes. So you’ll have to explore new ways to find investors for your business. The following are some of the ways
- Venture capitalists
- Participating in incubator events
- Pitch night events
- Angel investors
- Crowdfunding
- Networking
#1. Networking
An excellent place to start is by hunting for local investors in your area. Some of the network opportunities can be found in places like industry associations, Chambers of Commerce, Meetups for your industry area, Co-working spaces, Toastmasters, and specialized affiliation groups.
This networking may help you not only discover investors but also establish relationships that will help you achieve your fundraising goals.
#2. Crowdfunding
Individual investors can donate to ideas that interest them on several websites. You can solicit donations (e.g., on Kickstarter or Indiegogo) or exchange equity for cash (StartEngine, WeFunder, SeedInvest). Equity crowdfunding raised $214.9 million in the United States in 2020. (a 105% growth from 2019). From 2019 to 2022, the number of equity crowdfunding investors has climbed by 85% to 358,000.
What is the benefit to you? You are bypassing the middleman and going straight to the investors. If your concept takes off, you might make a lot of money while also increasing brand recognition. Be aware, though, that just 50% of efforts are effective.
#3. Angel Investors
Angel investors are high-net-worth individuals who invest in small businesses in return for stock. Unlike venture capitalists, who employ an investment fund, angel investors use their personal money.
#4. Venture Capitalists
You may never require the services of a venture capitalist (VC) especially if it’s a startup business. Perhaps all of your earlier attempts to find investors will bring your company or startup business to the point where it needs to be, earning income without the assistance of these large-scale investors. VCs are often in charge of a huge sum of money and enter the game later. They give large sums of money to assist an already successful business to expand more quickly and effectively. Venture capitalists, like angel investors, will hold stock in the firm and have a voice in how it is operated.
#5. Pitch Night Events
Frequenting events can help you get exposure. Pitch nights provide you with the opportunity to showcase your concept. You’ll need a lot of practice to pitch effectively. As a result, the more you pitch, the better you’ll understand what works and what doesn’t when it comes to attracting investor interest.
Pitch nights are held by various investing groups on a monthly, quarterly, or annual basis. Some industry conventions also have pitch events, so keep an eye out for that.
#6. Participating in Incubator Events
Accelerator programs are intended to give businesses the resources they need to be successful. Non-profits, business schools, civic groups, the government, and others can host startup accelerators. They will offer incubator events to assist startups in solving problems and achieving success. You may submit an application to develop your work, as part of their incubator events. Frequently, you will receive financing to continue working on your firm as well as business guidance and coaching. You’ll also meet other company owners who want to kickstart their own success.
How to Find Investors for a Startup
The following are easy ways to find investors for your startup business.
#1. Ask Family or Friends for Capital
When a business needs to find investors, many startup entrepreneurs turn to their own friends and family first. It’s also frequently more cost-effective because family and friends are more likely to easily lend you money at a better rate than a professional investor or a bank. You must choose if you want to ask for a loan or a direct investment, which generally entails offering them a share of future earnings.
Although persuading friends or relatives to invest in your business may appear to be a simple and uncomplicated process, it’s always a good idea to handle them like regular investors and clearly point out your intentions and the dangers involved. Having business relationships with personal acquaintances might have unintended implications unless you ensure that you communicate effectively with them at all times.
#2. Look for Avenues of Equity Funding
Receiving capital from a third party in return for a share in your firm is simply equity financing. Sharing a portion of your firm with someone else may not sound appealing when you’re starting out, but it helps you generate money quickly and utilize it to get your items to market. Investment firms, online crowd-funding platforms, incubators, accelerator programs, and online forums are all good ways to look for equity financing.
#3. Apply for a Small Business Administration Loan
The Small Business Administration (SBA) is a government agency in the US, created in 1953, dedicated to assisting small enterprises. Although they do not provide loans directly, they may assist you in finding approved lenders and may even guarantee the loan for you, allowing the lending institution to offer you better repayment terms and interest rates. Small Firm Administration may assist you in obtaining money as well as advice on how to build, launch, and grow your new business.
#4. Search for Private Investors
Private investors are individuals that find potential successful businesses (could be a startup) to invest in in return for shares in the company. Private investors are divided into two types:
- Venture Capitalists: A venture capitalist is an investor who lends finance to businesses in return for different benefits, such as an ownership share, a seat on the board of directors, or a percentage of future earnings. When a company is growing and considering a riskier venture, venture capitalists are usually sought. Investors’ money is used by venture capitalists rather than their own. (They set up a fund that is used by others to buy shares in the company).
- Angel investors are often wealthy individuals who find prospective startup firms to invest in, generally in return for shares. Unlike venture capitalists, who invest just to make a profit, angel investors are typically more concerned with the long-term future of the organization.
How to Find Investors for a Small Business
Okay, Other than the way you look for investors for a startup business, there are a few different ways to find investors for a small business. Let’s have a look at those options.
#1. Contact Businesses or Schools in Your Field of Work
Most likely, you already know people who work in a similar field to you. Perhaps you could find out from them to see if they have any suggestions for potential investors for your startup firm. You’re unlikely to locate someone eager to invest with just one call, so this research procedure may take some time. To network, you will most likely need to make a lot of phone calls or even attend business events. But if you keep exploring, you could just meet someone who is interested enough in your company idea or product to invest in it.
#2. Explore Crowdfunding Platforms
A crowdfunding platform enables a person or business to raise capital online via a website dedicated to the sort of funding required. Consider the following examples of crowdsourcing platforms:
- Reward-Based Crowdfunding: Contributors are requested for relatively small sums of money in exchange for some sort of benefit from the firm.
- Donation-Based Crowdfunding: The money provided, which is generally minimal, is not expected to be returned. The money raised through donation-based crowdfunding is frequently used for a specific goal, such as donating to people or families who have suffered a loss, or for a community with educational, medical, or emergency needs. Donation-based crowdfunding can also help raise funds for a charity or non-profit organization.
- Peer-To-Peer Lending (Or Debt-Based Crowdfunding): Peer-to-peer financing facilitates loans by connecting individuals or enterprises in need of funds with investors. Applicants fill out an online form, and the peer-to-peer lending platform gives potential investors a credit score, which they may use to decide whether or not to contribute money. The investors get their money back plus interest every month. They do not own any of the firms to whom they are contributing funding in this way.
- Equity Crowdfunding: This is a kind of crowdfunding in which investors buy shares in a company and become part-owners. They will earn a part of the profits if the film succeeds, even if their initial investment is not repaid. The sums involved are not insignificant; they often begin in the thousands.
How to Find Investors for Real Estate
A real estate investor is someone who buys property for the purpose of making money profitably. A real estate agent or realtor can partner with investors to find real estate investments or deals.
You can become a real estate investor yourself in a variety of ways, including buying a rental property, investing in real estate stock or a real estate investment trust (REIT), participating in a real estate crowdfunding opportunity, renting out a portion of your home, or building a spec home.
Where to Find Real Estate Investors for Partnership
There are tons of ways where and how you can find real estate investors for partnerships, which include bank finance, a real estate investment club, crowdfunding, your network, internet resources, and social media. Let’s go over them in detail
#1. Bank Financing
A bank can help you achieve your investment goals by providing a loan for a specific investment property. Real estate banks should provide a wide range of financing solutions, including multi-property financing.
The riskier the purchase, however, the more cautious a bank will be in funding real estate property. That danger can be mitigated with the assistance of a real estate investing partner.
You may need to apply for mortgage loans to acquire properties or find other real estate investors to assist you in raising finances.
#2. Real Estate Investment Club
Real estate investment clubs can assist you to find an investor by connecting you with other real estate investors who are looking to invest. When you pool your resources with others, you can make greater investments that you wouldn’t be able to do with just one investor.
#3. Start Crowdfunding
Crowdfunding is the process of pooling real estate investment cash from various investors via the use of a digital platform. Crowdfunding brings together people who want to give money to an investment that goes into a fund for a certain project.
#4. Target Your Close Network
You might not need to explore far beyond your neighborhood or other organizations to find the ideal partner. Consider relatives and friends, folks you’ve met via church organizations, current business colleagues, and talented members of your town council, among others. You may locate the investors you wish to collaborate with by refining and targeting your network.
Also, contact or find one if you don’t have already a real estate agent since they normally have a list of investors on file.
#5. Find Online Resources
Meetup and other online investing forums might help you identify the right people for prospective collaboration. However, make sure you utilize a trusted site or investigate the appropriate memberships – which in essence means, don’t get caught up in a scam or other dubious arrangement.
By establishing relationships on social media, organizations target/find real estate investors. Facebook and LinkedIn are two popular social media networks to use, especially if you structure your profile around your real estate business expertise.
Generally, you don’t have to show your company plan with precision while working with relatives and family. However, after you’ve expanded your network beyond your direct connections, you’ll need to go out and convince people to invest in an unproven idea or a fledgling company plan.
A business strategy, a firm’s purpose, vision, and clearly defined goals will all be required going forward. And you must express everything succinctly and effectively. Make sure you have a website that potential investors can look at. Also, you will have to pitch your idea to investors at some point. Hence, you will need to research how to properly pitch or present your ideas to future investors.
Also, know that investors require certain things before they can invest or put their money in your business. The following are some of their considerations
- Is your product or idea unique? Are the qualities unique? If not, what makes you think this will sell?)
- Business plan
- Management team
- Financial data such as profit, expenses, final expectations
- Success measures (investors seek to know how they can make their money out of the firm in due time.
Conclusion
Finally, investors are an excellent tool for startups and small businesses to skyrocket. However, the investors you choose can either mar or make them. That is why we have outlined in this article how to find the right investors that are fit for your company or real estate, startup, or small business. It’s always necessary to choose wisely; keep that in mind.
FAQs
How is a trader different from an inestor?
A trader is usually distinguished from an investor. A trader aims to make short-term profits by repeatedly buying and selling assets, whereas an investor uses cash for long-term gain. Typically, investors produce profits by investing in either stock or debt securities.
How can a small business get investors?
Your alumni network could also be an excellent place to start looking for investors. After that, you can check into trade associations or your local chamber of business. Also, keep in mind that networking is beneficial only when done correctly.
Are angel investors a good idea?
Angel-backed businesses are more likely to stay in business longer, develop significantly, and have a higher rate of return, according to Harvard Business School researchers.
Do investors make money?
Dividends are a type of monetary reward for equity investors. They reflect the percentage of the company’s profits that is distributed to shareholders on a monthly or quarterly basis. Dividend income, like interest income, is normally paid at a defined rate for a set period of time.
