The world is full of entrepreneurs ready to take on the world, but 99% don’t end up getting the long term investments. Read further to know what you can make differently.
To get the right investor on board, you need to know your stuff: do your due diligence, get your pitch on point, have a business plan that is realistic, and research your market. But first…
Who you should look for?
When you’re on the hunt for investors for your small business, there’s some language and terminology you should get to grips with:
The technical definition of an angel investor is someone with an earned income of $200,000 or with a net worth over $1million. This type of person floats around most industries and help entrepreneurs who have made it past the seed investment stage but aren’t ready to hit the venture capitalist scene yet.
A venture capitalist (VC) is an investor who puts money into startups that they see as having long-term growth potential. They’re usually investment banks, people with a lot of spare cash, and other types of financial institutions. VCs do play with a lot of risks, but there is also the possibility of big pay-offs with the right investment…
There are websites that specialize in matching small businesses to small scale investors, this is peer-to-peer lending. You make a profile and put your business plan out there and then lenders bid to invest in your business. Things are normally done on a quite personal level, with the interest rate on the lending being negotiated directly between the business and lender, and then the funds get released to the company.
Big corporations are always looking for ways to diversify their assets, find new talent, and get in on the latest technology to keep them competitive. Investing in startups is one of the best ways for the big players to do this; it keeps them relevant and can boost revenues and profits. There are corporations with funds set aside specifically for investing in startups, and there are a multitude of accelerator and incubator programs as well as business support ecosystems that are helping small businesses cultivate their opportunities.
Crowdfunding can make literally anyone into an investor. Sites like Kickstarter, GoFundMe, and Indiegogo let you pitch your business or product and anyone, anywhere, and they can choose to donate or pledge money. The best thing is that you aren’t ceding any of your company equity or value in the process.
The U.S. Securities and Exchange Commission (SEC) makes a clear definition between these two and it’s important to understand the difference when you’re looking for capital. In order to make sure the general public isn’t taking big, unnecessary risks, the SEC demands that investors get accreditation. You need to make sure that your investors are accredited — it’s something that every small business needs to know about so you don’t get screwed further down the line.
Clearly, there are lots of different types of investors and funding streams to consider for startups. Knowing the difference is going to make your hunt for capital easier and more effective, you’ll have a better chance of finding the right investors quickly. It’s not going to be perfectly easy to find investment, anyone who says otherwise knows nothing and you need to ignore them, but it’s definitely an achievable goal. Following our advice should make things clearer, a little easier, and faster. The next time we’re going to share some valuable tips and tricks on how to hunt out an investor for your tech startup easily. While in our Instagram account we share the number 1 mistake every entrepreneur makes.
See you there, folks!