You’ve developed your business and you’re ready to grow. It’s time to speak to an investor.But what makes the ideal candidate? And where do you find them?
Seeking investment, you’ll realise every investor is different. There are many types of finance to choose from, so consider why you’re involving an investor in the first place.
Once you’ve identified what you want, it’s time to find your investor. But where do you start?
To help you, we’ve pulled together some tips and guidance from investors themselves.
Decide what support you need beyond the financial.
Having an early idea of what you want from an investor will benefit you further down the line.
Though it might be tempting to take the first offer you receive, don’t!
Meet a number of investors.
Most can give you more than money — they also bring experience, passion, an understanding of your sector, guidance and even friendship.
Meanwhile, potential investors will want you to tell them what makes your business stand out.
They’ll be seeking a story, a vision they can buy in to.
“Investors bring the money but they also give support. So there needs to be chemistry – you need to get on.The key thing to remember is that some investors, like Angel Investors, aren’t going to exit for seven years or more. It can be a long relationship.”
Rod Beer Strategic Relations Director, UKBAA
Where to find your investor
Talk to your peers
Seek out other business owners and find out what worked for them.
But don’t restrict yourself to like-for-like.
Just because a business isn’t identical to yours doesn’t mean you can’t learn from their experience when it comes to finance and investment.
If what your peers are telling you sounds good, ask them to introduce you to their investors.
At this stage it’s about talking to as many people as possible.
“One big recommendation is to talk to other people and persuade them of your viability. Either they’ll invest, or they might know someone else who will.”
Jenny Tooth Angel Investor and CEO, UKBAA
Do some networking
Put the word out to your professional network. Attend industry-related events.
As with so many of these things, it’s about making contacts and expanding your pool of potential investors.
“The more you get out there, the more you learn,” says David Mott, Chair of the Venture Capital Committee at British Private Equity & Venture Capital Association (BVCA)Link opens in a new window.
“Get used to having conversations with investors. Train yourself — if you don’t have the skills already, then learn them. There’s no real magic to it, it’s graft.”
“Don’t underestimate the ability to share challenges with other businesses that aren’t necessarily operating in the same sector but are going through a similar business environment to yours.”
Umerah Akram Head of ELITE UK & Global Business Development
Prepare
Once you’ve lined up meetings, think about your ambitions for growth.
Ask yourself important questions, like how much do you need to make that growth happen?
Investors won’t necessarily look for a detailed business plan.
However, they will expect you to have a clear idea of your business and where it’s going.
“Forward planning is so important,” says Jenny Tooth, Angel Investor and CEO of the UK Business Angels Association (UKBAA)Link opens in a new window.
“You need to be very honest and upfront to keep the relationship strong. You must say how much you need and why you need it, as well as how much you’ll need in the future.”
If you’re looking for guidance on how to evaluate your business and prepare to meet investors, our checklistAre you ready for finance? could be a good place to start.
Then you can look forward to taking this exciting step into investment.
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FAQs
How to find a business investor
- Work with friends and family. Seek funding from friends and family. ...
- Look for private investors in the community. Often, your community is the best place to seek help in growing your business. ...
- Work with a local bank for funding. ...
- Seek out angel investors. ...
- Work with venture capitalists.
How to find investors for your business
- Get capital from family & friends.
- Seek private investors.
- Contact similar businesses or schools in your field.
- Look to crowdfunding.
- Reward-based crowdfunding.
- Donation-based crowdfunding.
- Debt-based crowdfunding.
- Equity crowdfunding.
If your company is early stage and has a valuation under $1M, don't ask for a $5M investment. The investor would be buying your company five times over, and he doesn't want it. If your valuation is around $1M, you can validly ask for $200K–$300K, and offer 20–30% of your company in exchange. Type of investor.
What is a fair percentage for an investor? ›
Searching for the magic number
A lot of advisors would argue that for those starting out, the general guiding principle is that you should think about giving away somewhere between 10-20% of equity.
How do investors get paid back? ›
The most common is through dividends. Dividends are a distribution of a company's earnings to its shareholders. They are typically paid out quarterly, although some companies pay them monthly or annually. Another way companies repay investors is through share repurchases.
How do I ask a private investor for money? ›
Finding the Right Investor
- Define Your Entrepreneurial Goal. ...
- Leverage Your Network. ...
- Craft a Clear, Concise Pitch. ...
- Articulate Your Product's Value. ...
- Tell a Compelling Story. ...
- Explain What Funding Would Provide. ...
- Highlight the Specific Investor's Appeal.
Identify potential silent partners
Close acquaintances, angel investors, investment firms, and other organizations or companies are all excellent options depending on the situation.
How do I approach a private investor? ›
How To Approach An Investor If You're Doing It For The First Time
- Find the events or communities where no one is pitching. ...
- Know your prospects as if they were close relatives. ...
- Create FOMO around your industry. ...
- Mention your business — but no money talk. ...
- Connect online and always stay in touch. ...
- What do you get at the end?
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
What is 100k for 10 equity? ›
So, if the entrepreneur is asking $100,000 with 10% equity, $100,000 is 10% of the company's valuation — which in this case is $1 million ($100,000 x 10). This is where the sharks usually ask how much the company made in the prior year.
The average cost is calculated by dividing the total amount in dollars invested in a mutual fund position by the number of shares owned. For example, an investor that has $10,000 in an investment and owns 500 shares would have an average cost basis of $20 ($10,000 / 500).
What do you say to get investors? ›
Skip the small talk.
Instead, get into the main reasons for your conversation. Most investors want to know about your business and why it's great. They also want to know how your business will help them. In other words, they want to know what kind of return will they get for their investment in your business?
How do I pitch to an investor? ›
How to pitch to investors when fundraising (and close the deal)
- Jump into a section for your next pitch.
- Identify potential investors.
- Assess the current investing climate.
- Get your story straight.
- Build your charisma and confidence.
- Deliver your elevator pitch.
- Tell your story.
- Show your market research.
Show investors that you have not only planned for growth but can also predict it. You should be ready to show how your business model will help your business make more money, and the value of your company (and its stock) will keep on growing.
What are the three types of investors? ›
The three types of investors in a business are pre-investors, passive investors, and active investors.
How to pay back investors in a small business? ›
There are multiple ways to pay back a business investor—whether in regular installments, with equity, or through a straight repayment. In some cases, an investor might not want their cash back! For example, they might prefer to increase their stake in the company in return for an increased capital injection.
