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Finding the right investors can be the pivotal step that propels your business towards success. Whether you are launching a startup, scaling an existing small business, or seeking capital to fund an innovative new idea, finding investment is a critical step. To find the right investor, you will need to understand the needs of your business and the different types of investors. This article will explain some types of investors and how you can find them.
Understanding the Types of Business Investors
Business investors can take various forms. The type of investor you seek can determine the level of assistance they can offer, their expertise, and your business relationship.
It is essential to understand the needs of your business to know where to find the right type of investor, including:
|Type of Investor
|Venture capitalists are professional investors or firms that fund early-stage and high-potential startups in exchange for equity in a business. Their goal is to achieve significant returns on their investments.
The timeline of your funding is a crucial consideration with venture capitalists as they generally engage for a shorter term than other investors. They may look to exit your company in three to five years. During this time, their focus will likely be to drive growth before their exit.
|Angel investors provide financial backing to startups and small businesses in their early stages. They often provide mentorship and expertise in exchange for equity or convertible debt. Angel investors invest their money into startups as individuals or as a group with a pool of funds. They typically have a portfolio of investments and get a direct stake in the companies they invest in.
It is vital to choose an angel investor who fits your planned timescale. Like venture capitalists, some angel investors can take a shorter-term view of their investment and will look to exit your company after several years. Some may take a longer-term perspective, so discuss and establish their plans before you decide.
|Crowdfunding is a means of raising funding for a business or a project by collecting small amounts of money from many people. Each contributor to a crowdfund may have a small financial stake in the business and often does not hold their shares directly. There are different forms of crowdfunding, including:
• reward-based crowdfunding;
• equity crowdfunding;
• debt-based crowdfunding; and
• donation-based crowdfunding.
You will typically conduct a crowdfunding campaign on an online platform. Be mindful that with equity crowdfunding, you will be giving portions of your equity to contributors, and with debt-based crowdfunding, you will accrue debt that you repay to contributors.
Know Your Business
Likely, the right investor is out there. You just need to know where to find them. The first step is knowing your business. You understand it best but think about its place in the market. Consider the qualities that make your business unique and what made you excited to start it.
Build an elevator pitch once you have established what makes your business unique and attractive to investors. Keep it concise and powerful. Be able to sell your business to somebody in less than a minute. Your pitch will be the hook you will use to catch the interest of potential investors.Continue reading this article below the form
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Finding Business Investors
You can find different types of investors in different ways. Entrepreneurs may find venture capitalists and angel investors by networking at industry events or online. Some successfully find investors through competitions where investment is available for the winners. Crowdfunding contributors will typically be found online through a successful campaign.
To have success with any of these types of investors, you need to:
- thoroughly understand your business;
- understand the market it sits within and the wider industry; and
- find out which type of investor will work best for your business goals.
The Importance of Networking
The network you have can often be a catalyst for your business development. Your connections may know of pots of funding and potential investors relevant to your business. Someone you know may be interested in investing, so reach out to people you think can help your search.
To improve and diversify your network of connections:
- attend industry-related events;
- join relevant organisations; and
- establish an online presence for you and your business.
LegalVision’s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.
When finding the right investor, your focus should be on the strength of your pitch and your network. First, pick the type of investment most aligned with your business’ goals. If you seek venture capital or angel investment, seek an investor whose offering aligns with your company and needs.
Not all investors are suitable for all businesses. Under the umbrella of each investor type, there are further subcategories. For example, there are angel investors interested in exiting after a short period and those who are interested in staying more long-term. There will also be investors who have different goals and levels of expertise. Consider what fits best for you.
If you require help setting up or developing your new business, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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