How to Find Investors for Your Business

When it comes to starting or growing a business, there’s one thing every company needs: capital. Bootstrapping isn’t always an option, as many businesses don’t have the kind of funds it takes to grow sitting in their coffers. That’s where investors come in.

Bringing in investors can not only provide your business with the capital it needs to grow, but you can also get valuable advice and guidance from an investor who’s been in your field for years.

How do you find the right investors? The key is identifying why you need money, how you’ll spend it, and what you’re willing to give up to find the investors who will meet your needs.

But First: Why Are You Seeking Investors?

It’s important to understand what you will do with the money and how it will help your business grow. Investors want to support a thriving business, not a sinking ship.

Before you start searching for investors, create a budget and map out what you will do with the funds you’re seeking. Not only will this help your business use the money smartly, but it will also help attract investors who see you’ve got a plan for profitability.

Are you seeking capital so you can open a second location? Looking for money to expand your product offerings? The more research you do into what your goal will cost, the better the expectations you can set with investors.

When to Know It’s Time to Explore Funding

How do you know when it’s the ideal time to look for investors?

If your company has been thriving and you’re ready to scale it to reach even more customers, you’ll need capital to do so. The tricky thing is the timing: you want to find investors once your business is doing well, but you need capital before you get so overwhelmed with orders that you can’t fulfill them without more money. Don’t wait until business is booming to start your search.

Another good time to look for capital is when you have a sustainable product with repeat customers. Investors want to see that your products are hitting home with your audience, and you’ll need the data to back that up when you pitch to investors. 

Another good time to seek funding is when looking to expand into a new product line or market. You should be able to showcase the success of your existing product lines as well as projections for what a new line might look like in terms of sales.

When It’s NOT Time to Seek Funding

Just as important as knowing when it’s ideal to look for investors is understanding when it’s not the right time. If business is slow and you’re struggling to pay your bills, you might be tempted to look for investors, but they’re not going to want to invest if they don’t see a clear path to profitability. A better option might be to tighten your belt and cut expenses until revenues improve.

When you’re starting out and don’t yet have a proven business model, investors may not find your business attractive as an investment. They want a sure thing, or as close to it as possible.

Get to Know Your Investment Options

Depending on the maturity of your business, you’ve got a few options when it comes to types of investors:

Angel Investors

Angel investors tend to look for new businesses to provide capital for, usually in exchange for a small percentage of equity. Angel investors are individuals (as opposed to investment groups), so they may provide less capital than other options on this list. But angel investors may be more patient with their expectations for a return on their investment, and they may be able to bring decades of experience and contacts to the table.

Private Investors

Private investors can be an option at any stage of business. These are quite simply individuals looking to profit from investing in a business. You can find private investors (and others) on online marketplaces like DealStream, industry events, or even through friends, family or acquaintances. Just be sure to create a document that outlines the agreement: When will you pay back the money? With what interest rate? Treat this as a business transaction, no matter what your relationship is to your private investor.

Venture Capitalists

If you’re looking for larger amounts of capital for a more established business, venture capital may be the right fit. Venture capitalists (or VC firms) typically manage pooled funds from large institutions and high net worth individuals. VC firms tend to look for a shorter period of return on their investment and tend to be more involved in the running of your business. Be sure you’re okay with having other chefs in your kitchen, so to speak.

Crowdfunding

A newer option for companies seeking capital is crowdfunding. Through online platforms, a business can create a campaign to raise money. That money may or may not have to be repaid, as there are different types of crowdfunding. Some allow people to donate money to a campaign in exchange for a token of appreciation, such as early access to a product or even swag. Others let people invest in exchange for a share of the profits.

Where to Find Investors

Once you’ve landed on the type of investor that is best for your company, you’ll want to find the right fit. Start by asking friends, family, and business contacts, since you never know where your network will take you.

Browse LinkedIn, as investors are often heavily active there, looking for brands like yours. Remember: building a relationship with potential investors is a long game, so don’t immediately dive into pitching them.

Attend industry events. These are fantastic opportunities to make great connections, whether you find an investor or not. Again, you never know where your network will lead.

Post your funding needs on a business marketplace. Investors often browse these looking for the right business opportunities.

Set Your Criteria

It’s as important that you feel good about the investor you select as it is for them to feel yours is the right company to invest in.

To that end, decide what you want:

• Are you willing to give up equity and/or a seat on the Board in exchange for capital?
• Are you open to taking direction from an investor with a different business style?
• Would you prefer a silent investor who doesn’t get involved in the day-to-day?
• How often would you prefer to communicate with your investor?
• How much equity are you willing to give up? 
• How much capital do you want/need?

Go into your meeting with a potential investor knowing exactly what you want, but be prepared to compromise to find a balance that will make both of you happy.

Before Pitching an Investor

The pitch is the most important event in this process, so make sure you get it right.

Have all your information ready. This includes profit numbers, sales projections, costs, and your budget for how you’ll use the funds.

Investors want a viable and scalable product. Make sure yours is developed and has a solid customer base. Be able to produce data on your customers, and consider providing testimonials.

Keep your deck short and sweet. Speak from the heart and fill in what the slides don’t offer in your presentation. Be sure to include slides about your leadership team to build confidence with your investors that the company is in good hands. Just as much as they’re investing in your company and product, they’re also investing in you as a leader.

Practice, practice, practice! The better you are able to smoothly deliver your presentation, the more investors will be interested in working with you. 

If Investors Aren’t the Right Fit…

Sometimes bringing on an investor isn’t the right fit. Maybe you don’t want to give up control of your company or you simply haven’t found the right investor. In that case, there are other options for finding the capital you need.

Small Business Loans

There are both large and small business loans available for companies with every type of credit. Before you sign the dotted line, make sure you’ll be able to generate more profit than you’ll pay in interest for the loan.

Grants

There are also grants for small businesses that provide money which does not have to be repaid. Some grants are targeted toward minority business owners (women, ethnic groups, veterans, and more) and others are available to businesses in a particular industry.

Bootstrapping

Truly, the most affordable form of financing is bootstrapping, since you won’t pay any interest or give up equity to get it. Setting money aside in your company may take time, so consider recalibrating your plans to scale or doing so slowly over time.

Final Thoughts

Finding the right investors for your business can take time, so be patient and start early.  Remember: your business needs to be attractive, and you should be able to demonstrate how an investor might profit by getting involved. Be clear in your expectations, and don’t be shy about negotiating to get what you want.