Accountancy Resources
Starting a business can be very expensive. As you know, there are many costs that you will occur from the day you come up with the idea, until the day you are actually open for business. It doesn’t matter whether you’re opening a pet store, starting a restaurant, building a tech company, or creating an e-commerce site. They all take money.
Getting money is easier said than done. Most banks and lending institutions are not great options for two main reasons. First, they often don’t hand out money to businesses that have zero track record. Just finding a bank to lend you money could be impossible.
Second, if they do lend to you, they’ll offer high interest rates and a strict repayment schedule. This can kill your cash flow and doom you before you even open the doors.
The best way to fund your business is an investment. It involves giving up a piece of equity in exchange for cash. This is preferable because there is no repayment schedule. The investor only gets a return as you become successful. It’s also a risk for them, which can make it tough for them to invest.
Some people are reluctant to give up equity. Don’t be. Both of you need to take the risk for this to work. Zuckerberg gave up more than 70% of Facebook to fund the growth. His equity alone is worth 24 Billion. Not too shabby.
Here are a few strategies to help you find people who will invest money into your business.
Write Down Everyone in your Network
A key element to gaining investors is having them believe you’ll be able to achieve what you’re suggesting you’ll achieve. If an investor doesn’t think you can do it, they won’t invest. They want to see a return on their money, so they’re really investing in you – not the business.
Who better to start with than those that know you best. Friends and family are way more likely to invest in someone they know than a stranger. These are the people most likely to believe in you.
Write down everyone you know, and cross off those you know won’t invest. Write down a number beside everyone’s name. That number should be a realistic number that you think they’ll want to/could invest.
Now work on the pitch.
Write Down Possible Outside Investors
Much like your own network, these are people in your community that you think might be interested in investing in your business. These are people you may not know, or know well, but they have a track record of being involved in the community, investing in other ventures, charity work, or are just well-known figures.
I don’t like to use the word “wealthy” here. It’s really hard to judge whether someone has money, and money they’re willing to invest. This list should just be about people you don’t know, that you think could be interested.
Once you have that list, find ways to pitch them. Don’t stalk them, but track them down on social media, connect with people that know them, etc.
You need to have a 5-minute pitch for them. If they want to hear more, they will, but get your pitch to 5 minutes or less. It’s much easier to ask for 5 minutes of their time than an hour presentation. You may need to be persistent. These people hear a lot of pleas for their time. They need to know you’re serious.
Attract Investors to You
If you have a great idea, start putting it out there. Make a website, get active on social media, and be newsworthy. If you can create a little buzz, you’d be surprised at the people that will come along for the ride.
This strategy just involves being public. Letting people know what you’re up to, keeping people informed, holding events, showing up at networking functions, and being involved in the community. The more you’re out there, the more likely you’ll be able to attract the attention from someone that’s interested.
Join and Incubator or Accelerator Group
Most communities have groups built for helping small businesses and startups. One major benefit of these groups is that you’ll have access to many people that could potentially invest.
This isn’t the only reason you should get involved in these groups, though. These groups will offer a ton of support and resources for actually getting your business off the ground and running smoothly. They can help you with staffing, product sourcing, office space, and even help you become a better leader.
They might be able to help you find money in other ways, like community and government grants. They can give you access to local governments if you need approvals or permits. There are many benefits to these groups. Access to connections is just one of them.
Crowdfunding
Crowdfunding is an interesting option these days. There are many stories, good and bad, about using this platform. One thing to remember is that it’s not just easy money.
You’ll need to generate attention and publicity in order to get your crowdfunding project the attention it needs to gain actual funding. Although the rules are changing, this method often means you don’t need to give up equity – but you will need to offer some type of reward to your backers.
These are just a few strategies for getting investment in your company. Success will vary depending on the type of business you’re in, and how great of a pitch artist you are. The biggest part is just asking. The worst that can happen is people say no.
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