Starting a small business is always an exciting time. But no matter how great the product or business idea might be, how leaner the venture can operate, and how big the company has grown in size, there will always remain a necessity for more financial capital. Even the uber-successful and highly-funded billion-dollar start-ups keep engaging in more fundraising rounds than ever seen before. Having sufficient working capital and runway to achieve the company’s next milestone is essential to accord the business a chance to fully live up to its potential.
However, the start-up funds need not mandatorily come from the founder or through a bank loan alternatively. One can take off the strain of their finances by turning to investors, who can, in turn, earn a good amount of money when the start-up makes a profit.
Ways to Find Investors
Here are a few options that entrepreneurs and start-up founders can take stock of to find the right investing parties:
1. Apply to Accelerator or Incubation Programs
The incubation or the accelerator programs are basically aimed at incubating and scaling start-ups in an environment of investors, mentors, and the right advisors. Many investment firms, universities, and seed funds offer such accelerator programs. These programs last for weeks or months, and their primary purpose is to make start-ups better in terms of their financial standing. They assist in raising funds and molding the business model so that it suits the market needs. Many incubation programs also have founders and industry veterans on-board with them who further help in the exchange of ideas and help start-ups smooth out the rough edges.
2. Reach out to Private Investors
There are mainly two kinds of private investors – Angel Investors and Venture Capitalists. An angel investor is someone with a high net-worth who has the money, resources, and the ideal background suited to make a company successful. These investors come in when the start-up is in its nascent stages and their investments would mean that they will own shares in the company. On the other hand, venture capitalists come on board when the small businesses are expanding and probably entering a riskier phase. They support successfully established businesses looking to bring in some modifications in their operations and now need money. So, based on the stage that one’s start-up is in, the founder can seek out the appropriate private investor.
3. Attend Start-up Events
Success in entrepreneurship and funding is all about visibility and getting noticed by the right investors. Attending events is one of the best ways to achieve this. These opportunities can also turn into pitch nights, especially for start-ups that require a lot of seed funding. Such functions are a great way to meet and interact with investors and scale one’s networks. These occasions are also ripe for finding oneself mentors who can guide in the success of the start-up. However, reveal only as much as required to receive funding as too much disclosure of information to investors could prove counterproductive.
4. Leverage Government Programs
Several governments across the globe are providing funds to various start-ups. India and France are the recent governments to launch a program, where entrepreneurs can easily raise funds for their ventures. The government programs are mainly of two kinds – first, where the government itself invests in the start-up, and secondly, where the government arranges for a meeting with the interested investors who commit to investing a certain amount of money in particular start-ups. Ideas that are good enough also get seed funding.
5. Crowd Funding
A crowdfunding platform enables entrepreneurs or start-ups to obtain funds online via a website, that specializes in the specific type of funding required. There are multiple crowdfunding platforms available on the internet and entrepreneurs can upload as many details as they want about their venture, asking people to fund in their start-ups. This also gives the business the marketing it needs, creating an interest among the public for the company.
6. Fundraising advisors
In cases where the entrepreneurs themselves do not feel confident enough to close a deal, they can hire a fundraising advisor instead. The advisors can meet potential investors in the founders’ presence and wrap the deal on their behalf. However, there are many fraudsters in the market that one needs to be careful of. So, do a background check before hiring someone and sharing the start-up idea with them.
Finding an investor for one’s start-up in today’s time has become relatively easy with a myriad of options available to choose from. However, the road might not be as easy as one might face rejections too. But it’s important to rise above them, learn from the mistakes and improve oneself. Soon, the right investor will come along to help take the business to the next level.
Authored by Sanjeev K Kumar
CEO & Co-Founder, Kuberans House