Investors for Your Startup—14 Tips on How to Find the Best Ones

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Hubspring Health, a cross-platform digital ecosystem for use in healthcare systems, won 25 000 USD non-equity grant at FAU Tech Runway.

Guys from Prynt set a goal of 50 000 USD on Kickstarter. Their idea of turning smartphones into instant cameras reached the goal in 33 minutes and raised 1 576 011 USD.

Developers of Brave browser got over 30 million USD in less than 30 seconds via ICO.

As a CEO you face the problem of where to get money for business. Investors, in their turn, are hungry for supporting promising startups.

There are different types of investments. A project’s future depends on how to present a startup idea and what type of investors to choose.

If you have a great idea, but no knowledge and experience, then finding an investor is a very difficult and almost impossible process.

If you have a fully-functioning Minimum Viable Product with a clear business plan and a certain customer base, then chances to win the business jackpot grow by times. You can knock on every door and show investors an MVP as a real proof that your idea is worth time and money.

Here you’ll read about how to catch a big fish and get a big profit. You’ll also know the key points and possible risks of each investor type.

#1 Friends, Relatives, or Family

These people are the first ones you can count on. And who knows what important connections they have, and which business circles they might belong to. Here we don’t talk about borrowing money free of charge or at interest. It’s about making a business partner from a friend, relative or family member, who’ll receive income from your startup.

  • Don’t mix personal matters with business—otherwise you can destroy both.
  • Discuss and write down all disputed issues and possible risks.
  • Friends, relatives, or family might lose their savings if a startup fails.

#2 Business Accelerators or Incubators

A startup staff is of great importance for these investors types. Besides financing, you can count on separate workspaces in buildings which are shared between other startupers. Such neighborhood is helpful for exchanging expertise and having new insights. Mentoring and guidance are available for you too.

Here are some of accelerators and incubators which foster startups: National Business Incubation Association (NBIA), One Million by One Million, FAU Tech Runway, 500 Startups, TechStars, Y Combinator etc.

  • You must agree with tough investment conditions such as a percentage of profits, or a part of your business.
  • The key startup idea can be radically changed in the process of cooperation with accelerators or incubators.

#3 Platforms for Launching Startups

You can also join different platforms to collaborate with investors from all over the world. These communities offer both financial help in launching startups and such tools as informational support, coaching etc.

As it goes on Gust, over a billion dollars was invested in startups via this platform. Startups.co Platform states that it helped over a million startup companies. Another platform which provides connection between startupers and investors is Idea Of Entrepreneur.

  • Study all prices, options, scenarios, and other conditions before making a deal.

#4 Business Angels

Business angels stand out among others for their involvement and expertise. Rely on those angel investors who can apply their experience in your project, and you will receive support. Mentoring and guidance, expert advice, and access to their database contacts—you can count on these things.

Angel Investment Network, Angel Capital Association, AngelList, Funded.com etc. are the most famous. Those ones which fit your business area or location the most are easy to google.

  • Angels usually invest in startups which are close to their current location.
  • Small projects are often not supported—angels prefer big projects.
  • If you choose this investor type, you transfer a part of your startup shares to others.

#5 Crowdfunding

Unlike the angels, crowdfunding provides financial support without transferring a part of your shares to others. Instead of this you give your product to investors as a perk, or give investors a large discount. Moreover, early feedbacks on product help update features and fix bugs without extra costs.

You can choose some websites from our list: Kickstarter, Indiegogo, RocketHub, Peerbackers, OurCrowd etc. These platforms are open for everyone, so your startup will also receive a free advertisement.

  • The more successful your startup is, the bigger commission fee you’ll pay.
  • Lack of expert mentoring and guidance in comparison with angels.
  • Final amount is limited.
  • You show an idea and accept the risk it can be stolen.

#6 Initial Coin Offering (ICO)

ICO was founded with Blockchain development. Now it’s a hype event worldwide. Startupers sell tokens (Brave team sold out BAT—Basic Attention Token), or coins for crypto-currencies or dollars/euros to investors to launch business. If a startup is successful, investors pay digital coin for the services of a future platform at a lower cost, or sell them on stock exchange.

  • Lack of legislative control.
  • Low chances to get extra financing after ICO has ended.
  • Rounds can be fleeting—some of them last less than a minute.
  • Long-term projects have more potential risks of fail.

#7 Social Networking Websites for Business Professionals

LinkedIn is considered to be the most famous professional website for searching investors. It has over 400 million users from more than 200 countries and 150 business areas.

There are other worthy alternative websites where users share their knowledge and contacts with startupers. Some of these platforms can give a possibility to move your startup to the investor’s country.

Here are some of them: Meetup, Xing, Startup Nation, EFactor etc.

  • It takes a lot of time to learn and use LinkedIn, increase contacts flow and earn reputation.
  • You need to keep track of ongoing changes.
  • Almost all your activity will be public.

#8 Private Equity Investment

This investor type offers a wide range of services and a great financial support. Private firms choose wide range of startups. You can count on investment in millions of dollars.

Look through such websites as The Equity Directory, Grow VC Group, MicroVentures, CircleUp etc.

  • Private equity investors sell their parts of businesses in a few years with great profits.
  • Study carefully all deals forms and conditions—otherwise you can lose control of your business.
  • Deals are made on large sums.

#9 U.S. Small Business Administration (SBA)

U.S. Small Business Administration and other similar sites also provide financial support to businesses via grants and loans with honest terms and conditions.

  • SBA fits small startups.
  • This investor type doesn’t claim your share of business.

#10 Face to Face

It’s simple—you’re looking for investors at certain showcases, meetups, conferences etc. Startupers and potential investors communicate face-to-face with each other.

eMerge Americas, for example, is an annual startup showcase. Web Summit is considered to be the largest tech conference in the world. There are a lot of local events in your country, so it’s easy to find something that fits your business.

  • Cost of participation can be too high for some people.
  • Location—the most famous events can be held on the other side of the world.
  • Your success depends on how you present yourself and an MVP.

#11 Road Show

It means that you travel around your current country or abroad to find investment for an MVP. You have to prove that a startup is high-tech, intuitive, user friendly, and will make profit. Such information as financial issues, IPO reasons, growth expectations etc. should be open.

  • You’ll often have to accept strict conditions. For example, an investor from Silicon Valley gives you 2 million USD with the 60 mile rule. It means that your company should open a branch there at a distance of no more than 60 miles so that an investor could have constant access to and control the business process.

#12 Your Own Marketing Strategy

You can increase chances of being found via host posts on popular resources and personal sites. SMM is of great help here too. A wide range of marketing tools is available for you.

Don’t hesitate also to share your experience on Quora, Reddit, Yahoo Answers, Stackoverflow etc.

  • To make things work hire a professional marketer, content manager, and SMM specialist.

#13 Government Grants

You can also count on investments in the form of government grants. Different countries offer various grant programs. Apply for grants which fit your business the most. As a rule, such type of state support is given free of charge.

  • Be ready for a hard fight—it’s difficult to obtain grants because of high competition.
  • You’ll have to report on the use of all resources and show the results of your project.

#14 Online Lending and Borrowing

Peer-to-peer platforms, large private investors, or non-traditional resources offer lending and borrowing without specific financial institutions.

You can look through Lending Club, OnDeck etc.

  • As a rule, such platforms prefer to support small business.

Conclusions

As you can see, there are a lot of ways to get an investment. The main thing is to remember that investors will spend their time and money on execution that is worth it, not on your idea.

You won’t go far on a bare enthusiasm, therefore visualization is your everything. Even in the simplest form—proceed investment—you still need an MVP, as a potential investor should be able to test everything.

Only in this case, the acquaintance of a startup and an investor is successful, and the deal is made. Wish you to find the best ones for you business!


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