The right investor is someone who knows your business well. Also, he is someone who can enhance the value of what you want to do. Above all, he has a deep pocket; meaning that he can handle several rounds of investments.
As to how and where you can find these partners to fortify your startup’s financial backing, consider these ideas:
1. Social Media Sites
Review professional sites like LinkedIn. LinkedIn is a rich source of funding opportunities for contemporary entrepreneurs. They present a list of potential financiers who meet your requirements and also provide contact details. Write down a list of prospects and put together your venture’s best story for follow-up.
Beyond LinkedIn, several other social networking sites can help connect you with investors across business segments and industry specializations that are relevant to your project. Many of the new ones can even connect you with foreign investors who participate in the global business environment. This is an opportunity to bring your product to their part of the world.
2. Business Advisors
You can tap on your own business mentors and advisors who may have access to investment capital. If they don’t, you may ask for referrals. Being introduced to an investor by a business associate or a mutual friend will increase the possibilities of closing a deal two or three times more.
Crowdsourcing Sites for App Developers
You may have heard of GoFundMe or Kickstarter. These are crowdsourcing funding solutions available for startups and they are mostly interested to support software development efforts.
Simply place your business in the appropriate shop window to draw investors to you. Crowdsourcing works most effectively for projects that have mass appeal, and come with high social value like projects that software developers initiate.
3. Relevant Industry Events
You can improve your startup’s credibility and visibility by attending these events. Here, you can get to know industry leaders who can provide you constructive feedback on your plan and solution. Note that it is always good for your business to make friends first before becoming a competitor.
Some of these people are known as angel investors and venture capitalists, and you can get funding opportunities from them by participating in different startup conventions taking place nearby.
4. Avoid Some Types of Investors
Investors are not always the same and you need to avoid some of them. Check on their track records, management style and values. Then strike out from your list these types of investors:
- Investment Sharks – These are financiers who prey on businesses that have little financial experience. Some of them don’t even read the term sheet or are plain desperate to close deals.
- Investors Who Love Litigating – Everybody knows that startups have no money to fight in court. Unfortunately, this weakness is being taken advantage of by some investors. They think that intimidation and lawsuit threats can ensure high returns and improve their control over their investment. Check the investor’s track record, and never assume that you will be the exception.
- Coach Investors – To be coached by an investor is definitely productive, but you don’t need frequent tutorials on how you should run your business. If the investor hangs around at your business premises for a long time before he writes the check, you may need to check your patience meter and decide to look elsewhere.
5. Check the Investor’s Ability to Fund
This is one area to really focus on when checking an investor’s track record.
- What was the last startup the prospective investor funded?
- How are his investments performing?
- How strong is he financially?
If the investor’s finances are not stable enough, that person will be put under stress, and that pressure will later on crawl down to you.
6. Reputation for Rounds of Investment
It can be expensive and time-consuming if you look for a new investor at every round. It can also result to a dilution of your ownership every time, which can render your business less attractive for funding. Find an investor who is known to participate in future investment rounds.
However, you need to show consistency in the way you run your business, so your investors will remain interested in you and what you are doing. Also, always update them about your plans and strategies to generate free cash flows in the coming months or years. Remember, your investors are also interested in knowing your plan on how to create value for them.