Finding the right investors for your startup is a crucial step in building your business. In fact, failure to secure proper funding can make it difficult for your brand to get off the ground. Even with a sound business plan and marketing campaign, you need financial capital to cover startup and related costs.
Is it Hard to Get Funding?
Getting funding for your new business is easier said than done. Unless you are willing to dip into your savings, you will need to secure a business loan from a financial institution; banks, credit unions, lenders, etc. Another option is to seek assistance from family and friends or private investors that have enough capital for funding entrepreneurial launches.
According to Andrew Rinaldi, co-founder of Defendify – a leading cyber-security company, it was difficult to secure money from private investors for their startup funding. However, Andrew and his team were successful in securing $1.6 million in pre-seed funding to get their business afloat. This was courtesy of investors from the Maine Technology Institute and 3dot6 Ventures.
Here are some of the ways the company was able to get the right funds:
- Effective business planning that cuts through the clutter of what you will need and not need to start and grow.
- Identify your needs and correlate them with funding needed to turn ideas into realities.
- If you do not have sufficient funding from bank accounts, look for alternatives. This includes traditional business or private loans, along with potential investors looking to diversify their portfolios with unique and profitable investments.
- Create early projections and forecasting for your business leads and revenue generation. Stay abreast of all the latest developments and trends in the industry you plan to serve.
- Paint a picture of potential profits, brand visibility, and market share for your startup. Present these materials to investors in a professional manner – so that they can make timely, informed and worthwhile decisions.
Investors vs Family & Friends
One of the biggest obstacles in starting a brand is financials. After all, you will need to cover initial startup costs, along with monies for trademarks, copyrights, materials, and social media – SEO advertising campaigns. Similarly, you will need enough capital for product launches, payroll, overhead and related costs. These are just the basic essentials of business building and do not include future brand growth and expansions.
With this in mind, how do you know if you are ready for an investor as opposed to asking a family member or friend for assistance? For one, you need to take stock of your personal investment and see if that is enough to cover startup essentials. If not, you need to extend the conversation to new resources with sound planning and timely deliverables. This, of course, should only be done if friends and loved ones can no longer fund your business startup. You also need to take into account how many investors have poured in funds and exactly what their returns or ROI will be?
Here are some benefits of seeking private investors for your new brand:
- Access your professional network for potential investors that might be interested in your new company. This can expand your base and possibly include friends-of-friends that might want to come in as well.
- Outreaching and sharing is the best way to generate leads, interest, and finally investments. However, the right investors are the ones that are genuinely interested in seeing your products and services off the ground.
- Private investors may open the doors to new opportunities for your brand. This includes access to new investors across extended networks that may align with your business goals and aspirations.
- Use all your available resources to find the right investors – phone calls, e-mails, social media, and other forms of correspondence without being overly pushy and aggressive.
- Investors can give you the right resources to fund your new commercial startup. However, make sure they know both the short-term and long-term financial impact of their investments. This includes potential losses, along with potential gain with projections based on the current business scope and market forecast.
Finding the Right Investors for your Startup
The right investor(s) must align with your business’ core values and goals. In other words, they must share your vision and believe in meeting the needs of clients of consumers. They must also be flexible and willing to operate in ways that work for and with you. Similarly, investors should have a good grasp on business investment essentials and monitoring your industry, market, and niche.
As a business owner or co-owner, pay attention to your gut. Use your instincts to know if an investor is a good fit or not. Sometimes, you will know right away but consider all aspects before you withdraw your business proposal. Remember, the last thing you need is to start off on the wrong foot with someone who can possibly be a vital resource down the line.
What Should Investor Proposals Include?
Investor proposals should be easy to scan and digest. Be precise, concise, and list the benefits of investing in your startup. While going through the economics and investment particulars is essential, do not limit your proposal to rigid projections and numbers. Instead, entice and engage your investor(s) with practical ways your products and services can achieve desired results. This includes how they will help buyers and industries while churning out profits and optimal ROI for investors.
The key aspect of business proposals is to secure a healthy and mutually beneficial relationship for all parties involves. While any business will go through trials and tribulations, staying the course and being unified is the only way to overcome adversity and obstacles. Make it abundantly clear that you’re willing to give investors more of a role in your startup – if that is what they desire.
Being a successful entrepreneur is also about timely communications with your investors, clients, and customers. You must maintain discipline while staying on track of your business strategy and goals. These are crucial in turning your startup brands and initiatives into lifelong dreams.