Entrepreneurs seeking funding to grow their enterprise certainly have their work cut out for them. As the owner of a small business or startup, you are probably already aware of this and know that these days there are a multitude of options to explore when seeking and finding funding. Traditional bank loans, venture capitalists, angel investors, crowdfunding … the possibilities are endless. However, it is worth mentioning that an owner’s home equity or savings are often the main funding sources for most new businesses, and few startups are able to attract outside investors. So how can you and your business be one of the lucky few to do this? The tips below can provide you with the edge you want to find the funding you need.
FINDING FUNDING: GETTING OUT THERE
With the overwhelming array of funding possibilities, finding a way to get in front of the right investor for your company can be a challenging task. Some of the most accessible ways to put yourself out there are through networking, media coverage, or websites that match businesses with investors. Depending on where you are in building your company, one might work better than others.
Networking is probably the single most effective way to find an investor for your business. According to Bruce Schechter, principal at London-based investment bank The Schechter Company, “…investors give preference to opportunities that come to them via trusted colleagues. And many angel investors will not even look at a deal unless it came in via their network – else straight to the delete key.” (proformative.com)
If you lack connections, networking can feel like being the last kid picked for the team in P.E. class. But there are ways to develop these relationships and find the match that’s right for you. Websites like LinkedIn are a good starting point, and can help focus your search to those who offer greater potential for funding, since you can seek out investors that have common business connections. Other possibilities include Facebook or Twitter; social media is a strong networking tool.
If you find a prospective investor, but can’t see a clear connection to them, do a little digging. Make some calls: to friends, former colleagues or employers, advisors, etc… You might even seek out businesses with models similar to your own, or businesses that were funded by an investor you are pursuing. Get advice from them to help you get in touch with that potential funding source. Also, look for referrals. Just because an investor isn’t a good match for your business doesn’t mean they don’t know someone else who is. It’s possible to turn what appears to be a rejection into a networking opportunity, if you can get the investor to pass along your information to another possible source.
Media coverage is another way to attract would-be investors. Creating and maintaining an active blog for your startup is one useful way to get media coverage. Not only will you generate interest in your company, but by honing your writing skills you will develop an understanding of how to focus in on what about your product is important to readers (and investors!).
In addition to writing about yourself, find writers who cover your industry. Pitch them with an interesting and concise story about your startup, and get your name out there through another author. Don’t try to win over the most well-known writers; they are inundated with hundreds of pitches; rather, seek out a middle ground with experts in the area of your business, and make sure to be clear and to the point when you approach them. To ensure a great pitch to a media outlet, be sure to keep it short: no more than three minutes is ideal. You want to grab their attention right from the start by explaining the problem and how your product will solve it. Finally, tell a story with a moral. Businesses love to learn from one another, so if you can offer some insights about your experience, others will want to know more.
Websites are also an alternative when searching for investors. There are literally thousands of sites that match startups and small businesses with all different kinds of investors. Some, like AngelsDen.com, focus on angel investors, individual investors who offer funding in exchange for ownership equity or convertible debt. Often, angel investors will form groups and pool their capital, offering advice and support to the companies they are investing in.
Other website options offer varied investor opportunities. Funded.com provides access to venture capitalists, angel investors, banks, and microlenders. PitchCrunch.com provides services to both entrepreneurs and investors, and allows you to send your business plan directly to investors. These are just a few of the many sites that provide matches between companies pursuing capital and investors who can supply it.
These are just a few ways to get your company in front of an investor. Getting a foot in the door, however, doesn’t guarantee that you’ll get the funds you need. You need to be prepared and know exactly what your investors are looking for. What will convince them to fund you over all the other pitches they hear? Look for our blog, “Finding Funding Part 2: The Pitch” next week to get some helpful hints on how to successfully present your company to investors, as well as some common mistakes you’ll want to avoid.