Funding is the key in the ignition of any business chasing success. But it can come at a very high price if you choose the wrong investors.
Much like a marriage, a strong relationship will see both parties flourish and succeed together, while a sour one will leave you asking, “what the hell was I thinking?”
Whether it’s angel investors or venture capital you’re looking for, finding the perfect investor for your business, with the capital and the knowledge to take it to the next level, is critical. The first step: knowing where to look.
Where to find investors
Explore your connections
Put yourself in an investor’s shoes. Every day your inbox is swamped with messages from budding entrepreneurs who all want the same thing. So, are you more likely to give your money, time and trust to a) a cold emailer, or b) someone who’s been introduced by a person you trust?
Do you know a successful entrepreneur who could point you in the right direction and vouch for you? If so, arrange a meeting with them and show them why your business deserves investment.
If your closest university has a reputable business program, have you asked them about their network of angel investors, venture capitalists and entrepreneurs?
And if you know another company in your industry has found an investor, can they give you any recommendations? Angel investment networks often specialise in certain industries, meaning this is a great way to make the right connections. And they specialise in certain locations too, such as Nottingham’s new angel investment network, Minerva.
Make yourself visible
Industry events are a hotbed for investments. They attract a wide array of investors and they’re your opportunity to be in the same room.
Set out to prove you’re market ready. Go with a clear idea of the type of investment you need, and make sure you’re equipped with a polished elevator pitch and facts and figures that you can share comfortably. Talk to as many investors as you can, ask lots of questions about them, how they operate, and what they’re looking for from you, and build on the relationships that are the right fit.
A strong social media presence will go a long way too. Be sure to spread the word that you’re looking for investors. And if you can show these investors that your product or service has a following, with support and testimonials from customers, their risk goes down, and your chances of securing better terms from better investors goes up.
Online investment platforms
Online platforms have revolutionised the way entrepreneurs connect with investors and raise capital. On AngelList, for example, you can use the search tool to find nearby angel investors, seed fundings and venture capitalists that specialise in your industry.
Crowdfunding has become an increasingly popular source of funding too. Platforms such as popular UK site Crowdcube give entrepreneurs access to small amounts of capital, sourced from large numbers of people. It’s not just angel investors and venture capitalists you’re reaching here, it’s the public too. They can invest as little as £10 in businesses, and the rewards these investors receive can be nonequity based, such as products.
What to look for when finding investors
It isn’t locating and contacting investors that can make fundraising an uphill battle. It’s finding the right investor for your business. Entrepreneurs often speak to over 50 investors before they secure funding, so you’ll need to choose between a long list of people to find the perfect match.
It’s a partnership, not a transaction
An amazing idea and pitch lay the foundations for your success, a quality investor helps it take shape. But it’s not money that distinguishes a good investor from a bad one. This is a partnership, not a transaction, and it’s all about the value they can add on top of their cash.
So ask yourself:
- Do you share a mutual connection, respect and values? Would you go to the pub with them? Because this is a long-term relationship, trust and chemistry are paramount.
- Have they worked in your industry before? What can they teach you?
- Who could they introduce you to that could benefit your business? Finding an investor that can help you secure your next round of funding frees up your time to focus on growing your business. You might also look for someone who knows a marketing expert, for example. The bigger their network, the more potential clients, future founders and team members you’ll have access to.
- Have they grown a business before? What’s their track record like? How can they help you manage risks? Investors carry out comprehensive due diligence, and so should you.
- How much time will they have for you? If they have a huge portfolio, sure, they’re successful, but how much guidance and attention will they be able to give you?
Be patient, persevere and choose wisely
Choosing the right investor is arguably the most important decision you’ll make as an entrepreneur, and once you’re working with someone, getting out can be very tricky.
Great ideas get funded, regardless of the economic climate. But even if you’re cradling the most ground-breaking, innovative product or business idea, be prepared for investors telling you your baby isn’t all that pretty.
That means plenty of “no’s”, and even when you start to hear “yes”, you need to make sure you’re taking an investment on favourable terms, from an investor with the expertise to realise your potential. Then, you’ll be able to start shifting up the gears together.