HOW TO GET IN TOUCH WITH INVESTORS

Investors are one of the most crucial and important parts of developing your business.

Pick the right one, and you’re setting yourself up for a great relationship. But pick the wrong one, and you’re in for a hell of a tumultuous journey.

Sometimes you need a couple of thousand dollars from your friends and family, or a substantial sum from a venture capitalist.

But have you considered the best option, the one most likely to bring you success in the future?

In this post, you will find all the important information on the types of investors, followed by the basic rules of how to get in touch with them.

What are the important steps to help you achieve your goal? Find out with a step-by-step checklist to help you keep track of your investment journey.

1. The different types of investors
Jump Ahead To:

1. The different types of investors
2. Understand your company needs
3. Pick the investor that best fits your needs
3. Where to find an investor
4. Contacting the investor
5.  Make a presentation, but don’t oversell yourself!
6. Finding the right match
Conclusion
Generally, there are multiple kinds of investors that startups choose from. It can be overwhelming when weighing your options. But take the time to analyze each opportunity from every angle to determine what route is the most logical for your business.

Angel

Angel investors commonly have an income that exceeds $200,000 with a net worth of over $1 million. They usually rock in the post-seed stage.

Typically, they are wealthy entrepreneurs that help startups struggling to find financing. There are also different types of angels.

Some buy stock or take a loan, others give advice or offer mentorship, and some seek a considerably high return on a high-risk investment.

You can also have a single angel investor, a group from an investor pool or through crowdfunding.

Because they’re investing their own funds, they focus more heavily on factors like trustworthiness when compared to a venture capitalist.

Personal

Your close network such as your friends, family, and close business connections are those that fit under a personal network.

It’s usual for these types of investors to join early on in the investment process. Be careful with this investment as you’re putting your friends and family’s personal finances at risk.

Peer-to-peer

Peer-to-peer is made up of a group that offers to fund small business owners. But it can also range from one person to many. It does not use official banks or financial institutions as the middle man and so the risk associated with this method of funding it a lot higher.

Although it has the advantage of offering lower interest rates as compared to banks.

Bank

Banks offer business loans. Although, it is more common for already established or up and running businesses to receive a business loan.

This is because you will need to provide a revenue stream. It will be easier when a relationship is already formed as a bank will know if you’re trusted.

If you go down this route you’ll be confronted with the different types of loans that you can take. It will differ from country to country.

Venture Capital (VC)

Venture capital comes into play when a startup begins to show significant signs of revenue.

They will invest large sums of money into a startup, with the revenue stream often coming from management fees and carried interest.

Although some VC’s invest in early-stage startups, depending on the industry that the startup is present.

Government grants

It is a good idea to check whether you are eligible to receive local or national grants, that can support your business from the start.

The grants provided by your government are not considered as something you need to pay back. Local governments in many countries are supportive of new businesses.

For example, in Denmark, small-to-medium sized businesses are entitled to funding from the MarkedsModningsfonden (The Market Development Fund). In 2016, 56.4 million DKK (€7.5 million) was allocated to businesses from this fund to support growth and employment.

Similar programs to this are run all throughout Europe. Contact your local government and find out how you can get entrepreneurial support.

Crowdfunding

With crowdfunding, you have a way to collect funds from a network of people. Any person can donate a certain amount of money in exchange for equity, or the product itself.

Using a digital platform to crowdsource money will engage a lot more people. The capital raised can be sufficient to set up a startup or a small business.

There are plenty of websites where you are able to collect funds. Read our full article on this topic to get a good idea of how exactly crowdfunding works.

2. Understand your company needs

If you are looking for investors you need to understand what your company represents, the purpose of the product or service you provide and what you would like to achieve after receiving the investment.

You will get bombarded with questions left, right, and center, so it is best to understand exactly what you are looking for before you venture down this path.

Ask yourself questions:

• What do you what to achieve?
• Why do you need investment?
• What risks can you expect with investment?
• Is this investment realistic?
• Do you need a long, medium or short term investment?
• How will this investment tie in with investments you already have?
• What is the cost of buying, selling or holding the investment?
• What amount do you need for your development?
• How will you make money for your investors?

3. Pick the investor that best fits your needs

Analyzing and finding the best option is very demanding, and takes time. This is one of the most important steps in your investment journey that sets the foundation of your business.

Decide on the most relevant option for your project. Discovering what is possible to accomplish can later determine the success of the goal.

The right stage

Search for the investor that fits your funding stage or round. For example: If the company is in an early stage of development or even the idea stage,  think first about personal, angel or governmentalinvestment.

They are the closest possibilities and are a great opportunity for newly established companies to gain momentum.

Additionally, government grantsare usually not considered to be repayable.

Moreover, an angel investor is able to invest in your company in exchange for equity. They are a good alternative when you are looking for investment in the early stages of your company growth.

Crowdfunding, on the other hand, is a non-traditional and alternative means of raising funds. You can gain the money you need for your company and build a community in the process.

Oculus Rift is an example of a company that started out as a side project and found their success on a Kickstarter campaign, one of the leading crowdfunding platforms.

3. Where to find an investor

It can often seem as though investors are everywhere when you are not looking for them, but nowhere to be found when you begin your search.

The process is like a game of cat and mouse, and it becomes frustrating at times. But alas! There are always opportunities to meet them.

Events

There are plenty of events in the startup investment community. Yes, tickets can be quite costly but it is a small price to pay for the knowledge that you can acquire and the networking opportunities.

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