As a business owner, you probably already do a lot on your own. For instance, you’re coming up with your own idea for the business, bootstrapping different aspects of it, and much more.
However, a time will come after a while when you’ll need funding to grow and develop your business even more. And that’s something you won’t be able to do alone.
If you are building a start-up from scratch, opting for the right investor will greatly help you. Here’s how you can choose the ideal option for you.
Finding the Right Investor – 3 Options to Consider
When it comes to selecting the perfect investor, you can ponder over five different options. In essence, each of them will come with its own advantages and disadvantages.
So, it’s important to weigh-in both before choosing someone.
1: Your Friends’ Circle.
Professional investors generally come with more than one string attached to them – asking for a massive interest rate, partial ownership, etc. Hence, if you don’t want to let these things get too much to you, it’s best to look for someone in your friends’ circle.
Note: However, don’t drop your level of professionalism just because they are a part of your life. Always be on your toe, tell them about how you want to grow your business, and stick to it till the end. Don’t forget to ask for their opinion on your approach too.
2: Equity Funding.
If your organization is still progressing as a start-up but has gone past the ideation stage, it’ll be best to opt for equity funding. This way, while you’ll have to give up a small share of your company, you will get a decent amount of money in return too.
Note: If you’re finding it difficult to select an investor for your cause, you can choose to take the help of Equity Investors. They can help you get Investor Data for Wefunder. Hence, it will be easier for you to find the right person for the job.
3: An Incubator.
An incubator, in essence, is a program, either a non-profit or private, that usually targets small business owners with innovative ideas. With them, you will gain resources and information in abundance to get your business idea off the ground.
Note: However, not every incubator will offer money or proper funding to you. They’re going to show you the right way – where you should go or how you need to plan your progression. It might be best to go for a local option if it’s possible.
How Do You Find the Right Investor?
Finding the right person for the job can be extremely tricky. Even if you find someone who resonates with the same future of your company as you – they may not offer the right funding.
Therefore, while you’re selecting someone, it’s important to look for the right individual from every corner. Here’s how you can work towards it.
Tip – 1: Have a Proper Business Plan.
Almost every investor tries to avoid a bad investment. Hence, when you are talking to them, it will be important to let them know about everything related to your business plan.
For example, you might begin by showcasing your current business model, how you want to improve it, and how much funding you’ll need. The clearer you are, the better.
Tip – 2: Listen to Them.
Once you are done talking, you should ask them what they think of your plan. And once they start offering their viewpoint, make sure to sit quietly and listen to them.
It will help you learn more about if both of you are on the same page or not. Additionally, you can also check if the investor resonates with your vision or not.
Tip 3: Learn about Their Past.
When choosing an investor for your purpose, you should always choose someone with a lot of experience. If they’ve been working for at least five years or so, it’ll be good enough for you.
However, before you choose someone, make sure to take a close look at their background. He or she should have a clean slate, and their client experience should be positive enough too.
Tip – 4: Their Approach.
The procedure of providing funding to an individual can be quite convoluted. So you’ll surely want to work with someone who’s extremely careful about their approach.
If you have chosen someone for your purpose, be sure to ask them about how they’re going to document the whole process. Also, this way, you’ll know if there’s a clause in here or not.
Tip – 5: The Interest Rate.
If you’re not providing the person with a percentage of your profit or partial ownership, you’ll need to follow a specific interest rate. Now, it usually tends to vary from person to person.
Thus, it might be best if you ask about the amount or percentage at the earliest. This way, it will be easier for you to calculate your budget accordingly.
Note: Here’s a thing. If you feel like the investment requires you to pay a lot of money, it may be better to ignore it as a whole. If possible, you should try looking for a separate option. The more you talk to people, the easier it will be for you to find the best option.
So, keep grinding!
The Bottom Line
When it comes to finding the right person for your investment, it’s always best to be careful. I feel like choosing one of your friends, or family members will be perfect for the job. However, if you aren’t too comfortable with the idea, you can go for equity crowdfunding.
Well, in this case, you’ll have to sell a portion of your business, yes. However, the amount of money you’ll be getting is much higher than usual. Also, it’ll be easier for you to streamline your financial reporting, as there’s no need to make any repayments in this aspect.