Are you an up and rising entrepreneur with a brilliant start-up idea? Or, is your startup already in the development phase, and needs only the right amount of money to oil up its gears? Whatever the reasons may be, startups do require investments at one stage or another, and finding the right investor for your startup may become a formidable task.
In this article, we will jolt down the information you need towards finding an investor for your startup.
- Find Your Pitch
- Select Your Mode
- Learn Hearing “No”
- Build Your Profile
From 2018-2019, more than 600,000 startups were founded in the UK (1), which helps us understand that the competition for finding an investment for your company is remarkably high. Thus, you will need to generate a unique pitch for your startup which can pique the interest of the investors.
Remember, you represent your startup – during the introductions, and initial pitch-ins, the investors will probably have no prior knowledge about your company. You have the responsibility to paint your start-up in the best light possible: start by sharing the bright idea behind your startup, key facts to describe it, and figures to back it up as a successful business.
Keep it crisp, clear, and concise so that the investors remain interested, rather than counting the seconds remaining in your boring tirade.
Although an investment for your startup can be generated through various means – such as bank loans, debt financing, retirement funds – finding an investor narrows down your choices to generally two modes: venture capital, or angel investing.
Venture Capital (VC)
In 2019, Venture Capital firms invested in excess of 230 billion GBP in over 32,000 deals globally. (2) This helps us understand how much investors all over the world are interested in up-and-coming startups and are more than willing to spare some cash for ideas that they believe can lead to exponential gains.
However, it should also be noted that a typical VC firm can receive over a 1000 applications each year, (3) out of which only a select few are bestowed with the funds after a rigorous, and time-consuming process.
An angel investor is an individual who provides funds for your startup in return for equity in your company. UK hosts a large number of angel investors who have invested in at least 15,000 small businesses from 2015, and the median initial investment by an angel investor is 25,000 GBP. (4)
Even though some business angels invest on their own, most are part of angel investor networks where the angels pool in their money for a startup. This helps them reach a larger number of startups, and equally share the profits and losses.
Finding an angel investor may seem like a daunting task, but there are a number of online platforms which help entrepreneurs connect with the angel investors e.g. Seedrs, Galvanise, TrendScout, etc.
TrendScout offers a much more personalised experience by providing one-on-one consultations with both the entrepreneur, and the angel investors looking for potential startups. The consultants have experience working with numerous startups, and thus help you in pitching out a much more thought out, and refined idea.
As is the key for any job opportunity, recommendations, and mutual contacts help go a long way. For any investor, to put in their money in your startup means that they trust you and your business to provide dividends for them in the foreseeable future. Thus, familiar faces, and people the investors have previously worked with, can help raise the chances for your business securing the needed investment.
Being the founder of your startup, you believe utmost in your brainchild, and cannot fathom how others, and most probably, the investors do not see it in the same light. Still, it needs to be understood that out of a 100 investors you meet, 90 will outright reject your proposal; the rest may discuss the idea further with you, and hold meetings, but even then there is only a slim chance that an investor agrees to funding you.
Recent reports suggest that the investors are favouring “quality” over “quantity” in choosing their investment opportunities. (5) This means that the competition between startups during their early stages is even more tough, and a balanced and heads-on approach must be kept while meeting potential investors.
You do not have to wait for an investment before building up your startup. You may reach out to the social media platforms, and build a base for your company there. Also, by gaining customers, you make your business less dependent on a third-party investment, which can help secure better deals with the investors.
Finding an investor for your startup is a long procedure and may consume more hours than you would know. Thus, it would be better to consider this a full-time job, or choose an online platform such as TrendScout to make the process easier, and more viable.
How do you find private investors?
Private investors can be found through your contacts in school alumni, business friends, and online platforms such as Seedrs, TrendScout, Newable, etc.
What is a fair percentage for an investor?
Most angel investors take about 20-25% share in your company. However, depending upon the size of the investment, the percentage can vary.
How do you find investors online?
Build a profile on any of the online platforms – such as Seedrs, TrendScout – and you will be matched with a list of potential investors.
How much return does an investor expect?
The investors typically wait for 5-7 years to be paid, and the return depends upon the percentage share in the company, and the annualized internal rate of return (IRR).
How do investors get paid?
The investors get paid through dividends from the company, or when the investor sells their shares.
How do you ask an investor for money?
Build a strong network, make formal introductions with potential investors, prepare a business plan, and a pitch for your investor.
How do I find investors to start a business?
You can reach out to your family, friends, acquaintances, online investment platforms, and venture capital firms.
How do silent investors get paid?
The silent investor can get shares in the company, or an agreed percentage of profit.
How much should I give an investor?
You should give out 20-25% of the equity, depending upon the size of the investment.
Where do I find an angel investor?
You can find angel investors on TrendScout, Seedrs, and various other online fundraising platforms.