Choosing The Right Investors For Your Startup

Choosing The Right Investors for Your Startup

You have an idea, a great team, and a fantastic attitude. You’re exited and ready to get to work, and you’ve already begun to put together your company. The only thing stopping you now is money – or a lack of it. You either need to secure funding fast, or you’re going to watch your dreams tank. But how do you find someone willing to give your idea a chance?

While there are many options for sourcing capital funds for your startup, no options are as lucrative as securing legitimate investors. The trick is finding the right investors for you and your business. It can often be difficult to find someone who will get genuinely excited about your ideas and shares your vision for the future. Here are some tips to help you find the right investor for you.

Know what your needs are

If you need some help navigating the business world, you may want a more hands-on investor, someone who can provide you with advice and guidance, and teach you the ropes. On the other hand, you may be looking for a silent investor, someone who will sit back and let you do your thing, without interfering in the day-to-day operations of your business. It’s important for you to lay out your requirements, and know exactly what you wish to get out of the relationship, or you may wind up with an uncomfortable battle of wills, or a disagreement over seemingly trivial issues.

Make a list of the key qualities you are looking for, and make sure you evaluate potential investors based on your needs. Ask questions about their expected role, so that you don’t wind up blindsided if they start showing up at the office every week.

Industry familiarity

Have a conversation with the investor about the industry. Do they know how quickly things change, and how flexible they may need to be about changing ideas? Are they going to be surprised by bureaucratic red-tape while applying for licensing, or unexpected changes in the cash flow situation depending on fluctuating materials prices? You will need to make certain that they understand the potential pitfalls and challenges to the industry, so they aren’t surprised when you hit a snag. If they don’t understand your market, they won’t be able to understand your plans.

Research your options

While there are numerous investment options out there, the 3 primary routes for startup companies are private equity, angel investors, and venture capitalist firms. Take a look at the list you made of your own needs; do you need guidance, a small boost, or a huge chunk of change to get an already profitable idea moving? The answer to your questions will help you to decide which route to take.

Private equity investments are the most basic form of investment funding, and are often made by private individuals. You convince them you can make money, and they will fund your project in exchange for a percentage of the profit or part-ownership of the company.

Venture capitalists typically target specific industries that are projecting large growth. They have the business know-how to provide assistance and expertise, as well as the contacts for marketing and other needs. If you’ve got a great idea and you can show huge potential for growth, this may be your best option. The downside is that they like to have a much larger stake in your business, and will take a larger chunk of your profits.

Angel Investors tend are individuals with a strong interest in your startup and may wish to take a more active role in the operations of your company. They are similar to venture capitalists in that they are able to offer assistance and business expertise, but on a much smaller scale.

Draw them in

Once you’ve decided what type of funding you need, plan a strategy for appealing to that investor type. Make sure your pitch is catered to their needs and desires, and show how your startup is the best option for them to invest their money in right now. You need to make sure you have done your research about your market, your potential, and your financials. Be certain that your pitch will explain to them how you’re going to meet their investing goals.

Choose carefully

Once you’ve made a decision about the type of investor, try to get as many interviews lined up as you can, and make sure you don’t just go for the first one that makes you an offer. The relationship you form with an investor is going to have a huge impact on the future of your company. If you decide that a fit just isn’t right for you, keep looking. You don’t want to wind up in a situation where your vision is lost because of investor incompatibility.