HOW TO GET INVESTORS: Complete Guideline For Startups

how to get investors
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How to finance a business is one of the most important questions that business owners must answer because bussinesses need capital to get off the ground. How you establish and run your business may be influenced by your choice of financing. Every company has different financial needs, so there is no universal financial solution. But you need to go through a process to find the ideal investor for your company and real estate investment. Every business need to identify how to get investors for their small business. The good news is, there are investors also looking for projects to fund from real estate to construction and other field. If you need investors, check out these tips on how to convince them to finance your business.

How to Get Investors

Finding investors requires a lot of effort, especially for female and BIPOC founders. Even though there are many funding choices available, business owners sometimes need to establish ties with various investors before deciding which one is ideal (s).

Consider taking the following actions to begin establishing relationships with investors:

#1. Obtain introductions to grow your network

Finding investors begins with expanding your network. Geographically or through clubs and programs like female founder groups or boot camps, you can be in a place where others are having those investor talks.

Instead of asking your connections for a general introduction (such as, “Complete you know any investors who would be interested in my business?”), do your research before you start reaching out. Make sure you’re requesting referrals to VCs with experience investing in your sector. Tell your introducer why you’re seeking a specific investment, and if they agree, be ready to forward an email.

#2. Aim to be where the investors are

For young entrepreneurs, search for other business owners and investors in the places they go, such as co-working spaces, hackathons, industry trade events, and conventions. Startup incubators and accelerators can also provide access to mentoring networks and investor-attended pitch competitions.

#3. Request help from your friends and family

Family members and close friends can make excellent allies. They may wind up being your company’s initial investors or they may be prepared to suggest you to other investors they know. But take care to avoid damaging your personal connections. Give possible family investors an honest and thorough business plan, be clear about what you want (a loan, an introduction, or an equity investment, for instance), and make sure to put all of the arrangements in writing.

#4. Increase your community involvement

Don’t forget to look at yourself. A network of former students and guest lecturers from nearby business schools may be familiar with financiers in your industry.

You can meet other business owners and potential investors at the National Federation of Independent Businesses, regional chapters of other organizations, and SBA community groups. Additionally, these groups usually offer free educational resources and commercial tools.

#5. Examine the potential for crowdfunding and brand building.

But remember to search widely as well. Crowdfunding has become more popular as a means of raising startup capital for new products. A successful campaign increases interest in and media coverage for your company, which may lead to additional funding.

Brand development, which can be done through crowdfunding campaigns, advertising, social media, blogs, and newsletters, is another important route to possible investment. You can use it to share your story, earn followers, and attract the attention of powerful people who are interested in this area.

How to Get Investors for Real Estate

If you are into real estate, it’s very much possible to get investors for your business idea. Real estate investors are people who make financial investments in real estate. A real estate agent or REALTOR® typically works with an investor to secure real estate investments or real estate agreements. Bank financing, real estate investment clubs, crowdsourcing, your current personal or professional network, and online resources like social media are a few of the ways to find real estate investors for a partnership. Let’s learn a little bit more about each option.

#1. Find A Real Estate Investment Club

Real estate investment clubs help you find an investor by connecting you with other real estate investors who share your interest in the industry. Pooling resources with others may stimulate larger investments, which may not be possible with a single investor.

#2. Start a Crowdsourcing Initiative

Crowdfunding is the practice of combining money from many different people for real estate projects, using a digital platform to find investors. Crowdfunding connects potential investors, who then contribute funds to a fund for a certain project.

#3. Online Resources for Research

Use online investment forums and groups like Meetup and BiggerPockets to find the ideal partners. But it’s important to pick a trustworthy website or do your study on the right subscriptions. To put it another way, stay away from shady deals and other scams.

#4. Use of Social Media

Social media platforms make it easier to work with real estate investors. Use Facebook and LinkedIn, two well-liked social media sites, especially if you make a profile that emphasizes your real estate industry knowledge. A convenient way to connect with other real estate investors is through the audio app Clubhouse.

#5. Consider Mortgage Lending

A mortgage is also a great way to get investors for your real estate business. A bank may be able to assist your investment goals by lending money for a particular investment property. A wide range of financing options, including chances for various properties, should be offered by real estate institutions.

The riskier the deal, the more cautious banks and mortgage lenders will be about financing real estate. With the aid of a real estate investing partner, that risk can be minimized. You might need to get in touch with other real estate investors to raise the money for your start-up or apply for mortgage loans to purchase properties.

#6. Target Your Network

The last on our list of how to get investors for your real estate business is to target your network. You might not need to venture very far outside of your neighborhood or other groups to which you belong in order to find the ideal partner. Consider your family, friends, acquaintances from your church, coworkers, and the able members of the local council. By narrowing and focusing your network, you can find the investors you want to work with. Real estate agents often keep a list of investors on file, so you might want to check with them as well.

How to Get Investors for Your Business

The technique chosen to secure money must be appropriate for the demands of the company. Where and how you hunt for money depends depend on your company and the kind of funding you require. You should be able to make decisions about which finance options are viable for your business and which investment opportunities to look into initially using this information.

#1. Venture Capital

The field of venture finance is frequently misunderstood. Many small businesses in the startup stage claim that venture capital organizations do not encourage creative or risky company ventures. Venture capitalists are businesspeople tasked with making investments using other people’s money. As part of their duties as professionals, they must reduce risk as much as they can. They shouldn’t take on any more risk than is absolutely necessary to produce the risk/return ratios that the sources of their capital requirements.

Venture capital experts look for businesses they think could quickly and dramatically increase their business value. Since the majority of these high-risk enterprises fail, the winners must be immensely wealthy to compensate for all the losers, they understand. They often focus on more recent products and markets that are expected to see tremendous multiples in quick revenue growth. They make an effort to only work with management groups that have experience managing prosperous startups.

#2. Commercial Lenders

Compared to venture capitalists, banks are even less likely to invest in or lend money to start-up businesses. However, established small businesses, are the most likely source of finance. Banks and financial institutions are criticized by small business owners and startup entrepreneurs for taking too long to finance new businesses. Federal banking laws severely restrict and forbid banks from making investments in businesses. Bank loans secured by the owner of the business’s personal collateral, such as ownership of a home, account for a sizable component of small business finance. Some claim that home equity is the best source of funding for small enterprises.

#3. Small Business Administration (SBA)

The SBA even guarantees loans to newly founded firms. The SBA does not actually provide loans; rather, it guarantees them so that private banks can do so without taking a risk. Usually, the administration and application procedure are handled by regional banks. You frequently work with a nearby bank when requesting an SBA loan.

The SBA normally requires the startup loan applicant to contribute at least one-third of the required capital. A real business or individual asset is also required to guarantee the remaining amount. banks that are SBA “certified lenders.” In as little as one week, a licensed lender can gain SBA clearance. If your own bank is not a certified lender, ask your banker for a recommendation of a neighboring bank that is.

#4. Family and Friends’ Investment

A businessperson should be aware of how much money they will require and that it will be in danger if I could just stress one thing to them. Be mindful of your bet size and never place bets you can’t afford to lose. The degree of risk is not totally clear to them. They are speaking highly of you if your parents, siblings, close friends, family, and in-laws invest in your business. Please make sure that both you and the other party are aware of how easily this money could be lost in that scenario.

Investors Looking For Projects to Fund

My observations indicate that capital is truly available and readily available to business owners who know where to seek it and how to get it. The truth is, that there are investors looking for projects to fund. However, most of these investors are financial analysts who will critically vet projects before releasing the fund.

#1. Omidyar Network

Omidyar Network is a philanthropic investment firm made up of a foundation and an impact investing firm. It invests globally in both for-profit and charity businesses. The company was founded by billionaire and eBay co-founder Pierre Omidyar, and since it launched in 2013, it has given grants and stock investments totaling more than $50 million to several businesses around Africa. The business awards grants and contributes up to $4 million in equity to businesses and nonprofits that have a great potential to have a positive social impact.

#2. African Women’s Development Fund

The AWDF is the first pan-African women’s grantmaker on the continent. Since the AWDF’s founding in 2001, 800 women’s organizations in 42 African countries have benefited from $17 million in funding.

The African Women’s Development Fund (AWDF) was established with the goal of developing a culture of collaboration and learning within the African women’s movement. It also supports the development of programs and institutional capacity.

#3. Tony Elumelu Entrepreneurship Program

The Tony Elumelu Entrepreneurship Program has received a $100 million donation from the Tony Elumelu Foundation (TEEP). Mr. Tony Elumelu, a well-known businessman and philanthropist from Nigeria, founded the initiative. It selects 1,000 businesspeople from all around Africa each year for a training, mentoring, and funding program.

The fund estimates that, over a ten-year period, the 10,000 start-ups and young businesses selected from throughout Africa will generate an additional $10 billion in income for the continent’s economy and result in the creation of one million new jobs. The TEEP Fund focuses on the citizens and permitted residents of all 54 African countries. All for-profit businesses with headquarters in Africa that have been in operation for fewer than three years are welcome to submit an application. Each participant in the program will get a $5,000 starting investment for their business.

#4. Innovation Prize for Africa

The Innovation Prize for Africa is an annual reward given by the Africa Innovation Foundation to artists and inventors that have game-changing concepts and remedies that could benefit Africa. A respected panel of judges oversees a rigorous process that selects ten nominees each year. Each nominee receives a gift card worth $ 5,000, and the best three concepts each receive a part of a $150,000 prize.

Grants are only available for submissions that fall within one of the foundation’s five priority areas: manufacturing and services; environment, energy, and water; health and well-being; and ICTs.

#5. Bill & Melinda Gates Foundation

Bill & Melinda Gates Foundation is a private organization founded by multibillionaire Bill Gates and his wife Melinda. The foundation, which was founded in 2000, is regarded as the largest privately run organization in the world to operate in complete transparency, with an endowment of $44.3 billion as of December 2014.

The organization has three offices, with the majority of its funds and expertise going to Ethiopia, Nigeria, and South Africa. Burkina Faso, Ghana, Senegal, Zambia, Kenya, and Tanzania are additionally home to the organization.

How to Get Investors for Small Business

The beginning of a small business is an exciting period. But bear in mind that not all of the first funding can come from the business owner themselves or in the form of a conventional bank loan. There are other options to help ease the strain on your money, like low-interest loans or investors who only get paid if the company is profitable.

Here are the top 5 methods for obtaining investors for small businesses that we advise:

#1. Solicit the aid of your loved ones or pals

This could be the quickest and most cost-effective way to generate funds for your business. Your family and friends should be informed of your company’s standards. Decide if you require capital investment from them or just a loan from them.

A financial investment entails that your firm would be owned by close friends or relatives, who would also assume part of the risks. However, if you invest, you won’t have to pay it back over time as you would with a loan and you might be able to get more money upfront. Investors won’t be paid until your business begins to make a profit.

#2. Ask the Small Business Administration for a Loan

Instead of providing loans directly, the agency uses a lender match tool on its website to assist businesses in finding lenders that the administration has already approved. A few loans will also have their terms and interest rates advantageous because the SBA will guarantee them. To assist small businesses, the Small Business Administration, or SBA, a branch of the US government, was established. It first appeared in 1953.

The agency is also helpful in a number of ways. On their website, they provide tools for entrepreneurs to create, launch, manage, and expand their businesses, as well as links to local resources and free online courses.

#3. Consider a Single Investor

Angel investors and venture capitalists are two types of private investors; in return for their investments, they frequently obtain company shares (shares that are not publicly traded). Let’s look more closely at the contrasts between these two groups of investors.

Angel Investors

An angel investor is a high net worth individual who possesses the resources, contacts, and knowledge necessary to start a successful firm. If an angel investor joins the group, it’s possible that his contributions will be sufficient to forgo the need for additional funding. But angel investors always aim for a high rate of return on their investment.

Angel investors frequently invest their own funds when a business is just getting off the ground. An angel investor may also wish to participate and have a voice in the day-to-day operations of a company.

Startup Investors

Venture capitalists are necessary when a company is expanding and may be going to engage in a risky undertaking. Instead of the venture capitalists own money, investors’ money is used. Venture capitalists may be required to invest far bigger quantities of money—up to millions of dollars—than angel investors. But there’s also hope for a huge return on investment. Similar to angel investors, venture capitalists will own shares of the company and be able to vote on how it is operated.

#4. Contact Businesses or Organizations in Your Field of Study

People that work in a field similar to yours are presumably familiar to you already. You might get in touch with them to see if they know of someone who might be willing to invest in your company.

You’re unlikely to get an investor after just one phone call, so you might spend a lot of time doing research. You might even need to make a lot of phone calls or attend trade shows in order to network. However, if you keep looking, you might find that one person who believes in the idea behind your product or business enough to invest in it.

#5. To Find Investors, Use Crowdfunding Portals

An individual or corporation can get money online through a crowdfunding platform by visiting a website that specializes in the particular type of money needed.

How do you find investors?

Here are the top 5 strategies we recommend for finding investors for small businesses:

  • To raise money, ask family or friends.
  • Request a loan from the Small Business Administration.
  • Think about individual investors.
  • Speak with organizations or institutions serving your industry.
  • To find investors, use crowdfunding platforms.

How do I get investors to give me money?

Simple Strategies to Draw Investors

  • Try networking to “soft sell” your product.
  • Prioritize results. 
  • Request guidance.
  • possess co-founders 
  • Describe the return on your investment.
  • Find a partner rather than merely a check-writing investor.
  • Join an accelerator for startups.
  • Carry through

Can you get investors with just an idea?

Moreover, there are a number of places where you can obtain funding for your startup with simply an idea, including pitch contests, incubators, as well as government and academic initiatives.

How do you approach investors?

The following ways will help you approach investors and possibly get funds to finance your business.

  • Reach out to angel investors in your industry
  • Show them the results of your prior business endeavors
  • You must be aware of the relevant numbers
  • Make thorough research a top priority
  • Stay assured

How do I ask angel investors for money?

If you need angel financing, do the following;

  • Be succinct and simple enough for the ordinary individual to grasp your pitch.
  • Avoid using industry jargon that potential investors might not understand.
  • Don’t blather. 
  • Be precise when describing your goods, services, and costs.
  • Explain why the market requires your company and why.

Conclusion

Investors are busy looking for viable projects to fund, whereas business owners are in search of investors. As incorrigible as that sounds, that’s the race that we see on a daily basis in the business world. To make it easy to get funding for your business, I think it’s best to rework your business idea, that way, investors will find it compelling enough to fund.

How To Get Investors FAQs

What do investors get in return?

What investors want depends on the type of investor in question. For instance, angel investors may likely want to get back between 20 and 25 percent of the money they put into your business. Whereas, venture capitalists may take even more.

How do you approach investors?

  • Make a short list of investors who are interested in your industry or are willing to invest at your stage. 
  • If you can, find someone you both know who can make a warm introduction.
  • Write a short and sweet request for your warm introduction or cold email. 
  • Find a major investor.
  1. Raising Capital: 7 Ways to Raise Capital For a Startup
  2. EQUITY FINANCING: Types, Sources, Advantages & Disadvantages
  3. How to Finance a Startup Small Business in 2022 (Top 13+ Options)
  4. COMMERCIAL REAL ESTATE INVESTING: What It Entails and How to Start Up Investing

References 

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