Unless you are going into a business venture with your pockets lined, getting your startup started takes capital. Finding the startup capital for your new company means finding investors, which is sometimes like going on a treasure hunt if you don’t know the right avenues to take. To help with the funding hunt, here are five tips for finding an investor for your startup company.
Rehearse and Re-Rehearse Your Pitch
The way you handle your startup pitch could be the difference between walking every player on the team of pitching the perfect game. Before you step foot in front of an investor, it’s imperative that you practice your pitch until it becomes part of your vocabulary and a topic that you are the authority on.
This means rehearsing, which should basically lay the groundwork for how you will handle meeting with investors. In other words, not only will you have to know your business plan like the back of your entrepreneurial hand, you’ll have to predict potential questions. Don’t go it alone, rehearsing with a friend instructed to give no mercy is a great way to get the kinks out of your startup pitch.
Research the Investors
Obtaining investments for your startup starts with knowing your audience: the investors. Learning about an investor’s ideals, past investments, and overall business mentality will help in securing the funding you need. But don’t put all of your startup’s eggs in one investor’s basket.
If you want to reach the largest audience possible, make a list of at least three potential investors you’d like to pitch to. Then, learn everything there is to know about each investor. Once you get a feel for their sensibilities, set up pitch meetings based on the most desirable to least desirable investment opportunities. By doing so, you’ll know how aggressive you need to be from one meeting to the next depending on your success rate.
Know the Difference Between Investment Types
Put your pitch and list of investors aside for a moment. Before you walk into the shark tank, you need know what type of investment you want to acquire for your startup. Besides, the investment type has everything to do with your potential for success. Private equity and venture capital are the most common types of investments and are made by privately owned institutions and individuals.
Venture capital in particular has the most room for growth because most venture capitalists provide expertise and advice for startups. Angel investing involves obtaining capital from an individual with an upper-level net worth, but it also comes with high interest. If you’re unsure of the approach to take and the interest rates involved, Fisher Investments on Financials can help you navigate the investment waters so you don’t end up with the wrong investment for your startup.
Be Honest About Your Startup’s Potential
One of the most important pieces of advice when it comes to securing funds for your startup is being realistic with yourself and your investors about the startup’s potential. This is hard to do early on because, in most cases, you won’t have any sales under your belt. Likewise, it’s very easy to become starry-eyed about how well your business will do.
In terms of ROI, you need to plan for the lower end of success. It may sound like the will to succeed isn’t there, but by playing it safe on the investment end, you’ll leave plenty of room for better-than-expected results on the business end. Likewise, planning for a smaller ROI takes some of the pressure off, which is extremely helpful when it comes to running a startup.
Let the Government Help
Private lenders can get you most of the way to your investment goals, but in case you need to fill in some funding gaps, the government can help. The U.S. Small Business Administration has an SBIC Program, which helps small businesses connect with investment companies. In addition, the government also offers numerous other loans and grants for qualified startups looking for investment help.
The investment tips above will help turn your startup dream into a fully funded reality.