Self-funding works for some entrepreneurs, but the average person typically finds that this sets severe limits on their company’s growth potential. At some point, most start ups will need to seek funding from investors once the business begins to grow. Finding an investor online opens up more options for finding one that is interested in your business and capable of giving your a fair offer. While this will take some work on your part, you can make the process easier by doing a little prep work beforehand.
Be Prepared to Market Your Business to Investors
Investors tend to be selective about where they place their funds. When you first make contact with a potential investor, you’re going to need to be ready to answer all of their questions. Having a solid business plan is important, and you may also need to provide additional information such as your income statement or balance sheet to demonstrate how your business is doing up to this point.
The investor will also want to know more about how you run your company, and they’ll be carefully analyzing its potential profitability. Being honest about your company’s current struggles along with its accomplishments helps to build trust between you and the investor.
Determine Which Type of Investor You Need
You’ll find several different types of investors online, and each one tends to offer different benefits and potential drawbacks that you’ll want to consider before you agree to a deal. Crowdfunding has become a popular way for start ups to raise money for a new business, and they can vary dramatically regarding what investors expect. For instance, some crowdfunding campaigns offer perks such as early access to new products, while others offer equity in the company.
Angel investors are another type that you’ll encounter, and these are usually wealthy individuals who are willing to provide enough funding that you’ll only need to work with them. Venture capital firms and banks are additional types of investors that remove some of the risk that you might feel with working with an individual investor.
Decide What You Are Willing to Give In Return
An investor rarely gives away free money. Instead, they are seeking to work out a business deal that provides them with some return on their initial investment. Usually, they’ll require you to offer them a percentage of equity in the company. Not only will this give them access to a certain amount of the profits, but the deal may also include them being able to play an active role in the decision-making aspects of running your business.
Before you sign off on a deal, you’ll want to make sure that you fully understand what the agreement means for your company today and into the future. The percentage of equity and other trade-offs you decide upon tends to vary significantly from one company to another, so make sure to do your due diligence to determine what you are comfortably able to give to an investor.
Searching for an investor is a good sign that you’ve got a strong business plan and are ready to proceed with achieving your dreams. As you take this big step in your journey, remember that you’ll want to consider all types of funding. Small business loans and grants are additional strong options that can help you gain funding for building your company while retaining more control over what happens during your day-to-day operations. While choosing how to get funding isn’t an easy decision, you’ll be happier with the outcome when you carefully consider all of your options.