They are strategic partners and invaluable assets with ageless wisdom and expertise. They also enjoy assisting small businesses in growing and succeeding.
Many entrepreneurs lack the financing necessary to expand their enterprises. They know what it takes, but they lack the resources to make their vision a reality. And this is where these individuals come in—as investors.
For small business owners, your company is like a baby—you’ve been with it since the beginning. You nursed it from infancy, cared for it, and witnessed its development into what it is today.
You turned it into a profitable enterprise. It’s so powerful that it’s provided you with a living and enabled you to provide for your family. But now you require some assistance. Because you’ve seen what it can be and gone as far as you can on your own.
Taking on an investor can be frightening, but it is sometimes required. This post will discuss how to find the perfect investor for your small business. But first, we’ll discuss the advantages of working with them.
How Investors Can Assist Small Businesses
An investor’s worth extends far beyond the money they supply. When you work with someone who has experience in your business, they can share their knowledge and skills with you, and teach you things that would take you years to learn on your own. Some even seek out young entrepreneurs in order to pass on their skills and help them in the early phases of growth.
Seasoned investors might advise you to avoid making blunders. You can also utilize them to test ideas as you evaluate new company opportunities.
Another advantage of working with investors is that they can provide you with vital connections. Some may be able to connect you with the proper people—and get you into the inner circles of people who were previously out of reach.
Where Can You Find Investors for Your Small Business?
Funding to start, operate, and expand your business does not have to come only from you. It can be obtained from a variety of sources, including investors. We’ve provided some tips on how to find an investor for your business below.
Start With Your Family and Friends
Nobody knows you as your family and friends do. They may be the first to invest if they sense potential in you and believe in your idea. Especially if you have a track record of success or are known for doing something especially well.
As an example, suppose you’re the best baker in town. You’ve competed against your peers and won several honors, and you’re usually the first person people think of when they want something sweet.
When you get the idea to create a pie store, you may not need to explore beyond your close circle—people who know you, love your products and have direct knowledge of how fantastic they are.
An investment from relatives and friends is frequently one of the simplest to obtain. Other solutions require you to jump through hoops or cut through red tape. You could also solicit contributions from a number of friends and family members. Every penny you raise will get you one step closer to your goal.
Request an introduction from one of your contacts
If you don’t have any friends or relatives who can invest, take a step back and think about their relationships. Could they possibly get you a strong introduction?
An introduction to a possible investor will go considerably further than contacting the person on your own—whether by cold email or another method. And you never know who your pals have ties to. Perhaps you have a cousin who works for a huge investment firm or a friend who can put you in touch with a startup support group.
Better yet, perhaps you know another successful entrepreneur who can attest to your abilities. This will help an investor who depends largely on the word of other business owners, particularly those they respect and have worked with.
Contact Schools and Other Companies in Your Industry
Consider how many people in your industry you know. You’ve most likely met others at industry gatherings or run into local business owners. You could also join online communities of people in your business.
Contact some of them to see if you can receive a referral or recommendation. You could also contact schools and educational institutions in your field. The professors and department heads may be excellent resources for putting you in touch with prospective investors.
Try Crowdfunding Platforms
Crowdfunding systems assist individuals and businesses by allowing them to raise the finances they require online. Here are the various sorts of crowdfunding sites, as well as samples of each.
People who participate in reward-based crowdfunding donate a set amount of money in exchange for a reward. The reward is usually related to the business in some way—for example, individuals get to experience the product in exchange for investing. Examples include Kickstarter and Indiegogo.
Here’s how it works: Imagine you own a doughnut business and want to fund $500. Everyone who invests $15 receives a dozen donuts. Pledges of $25 get two dozen donuts, while pledges of $50 get three dozen donuts plus mocha iced lattes.
The money provided to donation crowdsourcing is not expected to be returned. People give voluntarily, usually to assist fund a specific initiative. The goal can range from gathering finances to support a needy household to offering emergency aid to an entire town.
Donation-based crowdfunding is exemplified by GoFundMe.
Peer-to-peer lenders connect enterprises in need of capital with investors. Applicants begin the process by completing an online form, and lenders provide a credit score to potential investors. The choice is then taken on whether or not to lend the money.
This option appeals to investors since it allows them to collect their funds on a monthly basis, including interest. Borrowers often pay less than they would for a bank loan, while investors earn a better return than with a normal bank investment product.
The risk to the investment is significant because the government does not safeguard it. Lending Club and Prosper are two examples of peer-to-peer lending.
Investors take a stake in the company through equity crowdfunding. The initial investment is not repaid but rather returned to the investor in the form of firm shares. They also get a cut of the profits.
Typically, investment levels begin in the thousands of dollars. Because a return is not guaranteed, equity-based crowdfunding is a significantly riskier choice for the investor.
An example of an equity crowdfunding platform is OurCrowd.
Be Strategic When Networking
Begin by considering how you can connect with the investors you wish to recruit. Consider where they spend their time, both in person and online. What organizations do they belong to? What are their favorite extracurricular activities? Then consider how you can join those organizations.
Networking with the right individuals opens up previously closed doors. Your alumni network may also be an excellent place to start looking for investors. Then you can check into trade associations or your local chamber of commerce. Your local Small Business Development Center (SBDC) is another useful resource.
Please keep in mind that networking is valuable only when done correctly. Begin networking by offering to help others. Allow others to trust you and get to know you. Don’t make an obvious sales pitch that will turn them off.
Apply for a Small Business Administration Loan
The Small Business Administration (SBA) is a government agency primarily dedicated to assisting small businesses. The organization does not make loans, but they do have a lender match tool on their website. This assists businesses in locating lenders who have been approved by their organization.
The SBA will also guarantee loans and give lower interest rates, among other benefits. Their website is chock-full of useful resources for business owners. It’s packed with materials to help everyone, from those just starting out in the company to those looking to expand their operations.
Should You Get Investors for Your Business?
There is no right or wrong technique to find a business investor. Some methods may necessitate more work than others. You might even think about options we didn’t include, such as collaborating with angel investors.
Don’t let a shortage of funds prohibit you from achieving your ambitions. Consider how much you require first, and then make a decision. You can use one of the methods given above or a combination of them. It is about what it takes to achieve your business objectives.
Nobody knows your business like you do, and your journey is unlike anyone else’s. So go through all of your options to locate the greatest solution for you.