Where to Look for Investors?
Now, when we finished with the preparation part, it’s time to figure out which channels are available to find investors for pre-seed and seed rounds.
In this section, we will also consider the necessary tactics to make a shortlist of investors successfully.
In total, we highlighted 4 major tools to find an investor:
- Startup events
- Online profiles
- Business Accelerators and Incubators
Nobody forbids you to utilize other approaches to find investments. You can still ask investments from family and friends or an investor you know.
Strategy for Finding Investors: General Tips
The search process for investors is mainly centered around cold outreach methods and research activities.
Let’s look at general recommendations on how to look for investors:
- How to formulate your expectations
- How to systematize and prioritize them
- How to contact investors
At first, you need to Find A Common Link with investors.
It is hard to meet with an investor if you do not have mutual acquaintances or common links. That’s why you can start by searching for a common acquaintance who can set up a meeting between you and the investor.
We know that it may look too generic. But there are a lot of startup communities on the local and regional level or the Internet. All you need to do is to start networking activities. First of all, you can begin posting your details on Reddit.
It will help you to find private investors within your circle.
Ask your fellow startup founders from whom they have secured funding and then approach the same investor with your idea.
An investor chooses to invest money in a startup based on various factors. Some pay attention to the founder’s personality, while others want to be a part of a mission. But the opinion that some investors are in this business to make money is also correct.
Secondly, Publish Blogs and Send Emails to investors.
Yes, you read it right. Blogs and emails are cold outreach methods. While the blogs build your authority gradually, emails allow interested investors to respond to you directly.
You can use a blog as a tool to tell your story. Your website will attract traffic and produce an image of your startup in the eyes of the investors.
Investors are unlikely to read all the content that you publish, but it will leave an impression. And sometimes that is enough to make a connection.
It is all about getting noticed. Outreach emails, on the other hand, help founders make their pitch through an email. You may not be able to get seed funding for your startup right away, but the primary motive is to be noticed.
So that when you meet the investor in person, you will be one step ahead of the others.
And thirdly, always aim to Get the Bigger Fish.
The European Corporate Governance Institute published an article on “How do Venture Capitalists Make Decisions”.
But to put it simply, individual venture capitalists and those who work as a part of bigger organizations are serious about their investments.
One of the aspects the venture capitalists are looking for is your financial maturity. They want to check how you managed the finances, the growth rates, and your ability to make smart decisions.
To attract them, you should prepare your product and ensure it functions as planned. Venture capitalists may also take an interest in the market share.
They may want to know about your social media presence and the customers’ feedback on your product.
The research showed that one of the most significant factors for the Venture Capitalists is the team behind your startup. The team personnel and its corporate solidarity matter to a great extent. Hence, include the strong points about your team in the pitch deck.
Now, let’s consider tactics on particular channels.
This form of capital raising is the result of a combined effort of a group. It can be either a group of friends, relatives, clients, or individual small investors. There are various approaches you can take to reach out to the crowdfunding sources.
You can use social media and crowdfunding platforms for this purpose. Social media platforms will help to accrue a broad audience and exposure.
Crowdfunding brings in the element of surprise that cannot be found in other mainstream options. But it is still less risky than other forms of funding a business.
Moreover, this option has no set limit for investments – it can be from a few thousand dollars to millions. Crowdfunding can get you the required capital. And since there are a lot of individuals who are ready to invest, if your pitch is right, it will convert.
Sometimes, when you are looking for seed funding or early-stage startup funding, this option is better. The significant difference between the other mainstream sources and crowdfunding is simple.
The mainstream sources take you too far from your goal, which is pitching to the investors. You have to choose the right target and approach it at the right time.
If it sounds too confusing, you can simplify the process by pitching your idea to a private equity firm or a venture capitalist. But only if the stage of your startup makes you ready to take that plunge.
Understanding the investor’s mindset is the key here. If you are not able to convince them at the first try, you may not get another chance.
It means that you have too few opportunities here. But in crowdfunding, there are multiple individuals involved in the process.
It is like “One Idea, One Platform, and Multiple Investors.” At least some of the investors will like your idea and can also invest in it.
According to Transparenthands.org, the top Crowdfunding platforms in the USA are Kiva, GoFundMe, Funding Circle, Crowdrise, Kickstarter, Indiegogo.
Figuring out How to Shortlist on Crowdfunding Websites
Crowdfunding is all the rage over recent years. These are the platforms that help founders raise money in small amounts. But the main trick is that there are many people who able to invest in startups.
Today, Kickstarter and Kiva are the most influential platforms. They help founders and entrepreneurs raise money from the crowd. But first, you need to create funding campaigns.
Creating a funding campaign also requires to sweat for a while. There are different forms of crowdfunding you can choose from.
Below are some tips for creating an effective crowdfunding campaign:
- Creative Startup: A significant aspect of getting the crowd to fund your startup is about having a creative and innovative project.The definition of creativity and innovation differs from person to person. But, your motive should be to convince the backers to donate to your project, so do your best to attract them.The more backers your project has, the higher the chances to get funding from other investors.
- Who is your Customer: While creating a campaign, always set your target audience. If you think that your product is for everybody, then your idea is not viable.So always set your market. In that case, you will get leads from those people who think that they need your product. Crowdfunding websites help you in both ways – in getting the funds and promoting your product.Just imagine that your product would have 10,000 backers who think that your product has potential.
- Marketing Plan: You will also need to create and share an authentic and foolproof marketing plan with the funders. If they are backing your venture, they also need to see how they will get back their investments.And that is why you should make them understand how you will market the product.A well-thought and foolproof marketing plan includes such strategies as networking, creating a website, and Social Media.Apart from this, you should also build a blog and exercise email marketing.
- Add a Video: It is your chance to get ahead and share your vision with the world. Crowdfunding websites are accessible across the globe, and users, who have access to them can get on board.
The events and conferences allow startup founders to expand their network and address a larger audience on a single occasion. It is an effective way to find startup investors.
It was all about creating a crowdfunding campaign and getting investors for your startup. Even though the most popular of them are Kickstarter and Kiva, you should know how to select a crowdfunding website that corresponds to your needs.
A crowdfunding website should have such features and services that are beneficial both for the founders and investors.
And only after both of the parties are satisfied with the performance, a crowdfunding website can become profitable.
Here are the core features to consider while looking for an appropriate website:
- Website Infrastructure: A viable infrastructure of a website is something that you must consider first. If a website is not easy to use or it does not provide the right exposure or has a limited outreach, there is no point in registering on it.
- Payment Methods: The crowdfunding websites that have a local outreach and cannot accept international payments should be avoided. It not only limits your outreach but also narrows the scope of your product sales.
In essence, a crowdfunding website should allow you to cross-sell and upsell. And if you are not able to get the right exposure from it, consider looking for another option.
- Managing Finances: This is one of the most critical aspects of operating within a crowdfunding platform. You might get a lot of money from it, but you need to define – would it be your capital or income.Will it be taxable, and if not, how would the government account for this money?Moreover, these websites have their own specific rules. Make sure that you learn them before putting in your efforts.As an example, Kickstarter’s “All or Nothing” rule is something that you must consider before getting involved. It means that if you set a goal for funding and fail to reach it, you won’t get the funds.
- Trust: This is important. And there is no straightforward method to know which platform can be trusted. To check it, you can rely on the popularity index of a few websites.Such platforms as Kickstarter or Kiva, for example, have proved to help founders launch their ideas and get the required funding. Moreover, some ideas managed to get 100% funding within several hours.
- Transparency: Not all crowdfunding platforms will bring the level of transparency and control you need. A good example here is Kickstarter since it provides you with full access to your campaign.You will also get access to the Analytics so that you can reframe the strategy or modify the campaigns. It is essential to have such tools if you want to get better exposure.
Startup Events and Conferences
Networking is another free and powerful tool for searching for an investor.
If you don’t have a network, then start building it right away. One of the ways to do that is by participating in conferences and summits. They can be either general or startup-related events.
Or it can be conferences related to your industry.
In any case, you will come across a diverse group of individuals. You can meet with potential investors and partners. Moreover, you will get together with founders and entrepreneurs who once have been where you are now.
They may advise whom to approach and what to do next. The journey from being a startup founder to owning a big business is not smooth. There are many things you will need to learn along the way.
How to Attend Events and Conferences and Prepare for Them?
Events and conferences are a perfect opportunity for the startup founders and entrepreneurs to enter a world where the big investors and VCs help and support small businesses to grow and succeed.
These are the places where the interests of every participant align. They may differ over the spectrum, but one way or another, the purpose is similar.
For a startup founder, the events and conferences are the chance to expand their outreach and address a larger audience from a single place. It is an exceptional opportunity to find startup investors.
You can establish some useful contacts in these events and can also increase your visibility. A significant benefit of networking is that you can share your contacts as well as get contact information from the investors. It gives you another chance to meet them outside of the conference or event.
It is your chance to get noticed. Attend as many conferences as you can. Get known in your industry. Talk to people, founders, journalists, bloggers, investors, and VCs.
But first of all, you need to be well-prepared to attend the events and conferences. It means that you need to be ready with your pitch, product, and what you are going to tell the investors.
Before participating in an event or conference, you should define your target audience and business goals since these two aspects are prominently asked questions in such activities.
Especially in tech startup events, where the investors and other participants would definitely like to know who is your target audience.
The way you define your audience and its benefits for that audience is something that matters the most. And you must not only represent these aspects but understand how to achieve your goals.
Let’s take a look at the attendees of such events:
- Local Students
- Fellow Entrepreneurs, startups, and companies that are here to check the latest products and trends in the market
- Media Personnel
You should prepare for events in advance. Moreover, the bigger the events are, the more rigorous are the processes for selection. But don’t forget that you can benefit from participating in the pitch contests as well on the stage.
Here’s how you can prepare for the selection process and increase your chances to succeed. Remember that these events are highly competitive, so you need all the help you can get. As the old saying goes, “forewarned, forearmed.”
Below are some key points you need to know to prepare for a startup event:
- When you apply for such an event, you need to fill a questionnaire. It contains basic questions that require one-word answers.
- You should describe your startup in less than 10 words.
- You will have to share information about your team, finances, and the industry of your product.
Fortunately, if you are selected, you will get a call from the moderators or scouts of the events. And once it happens, you can apply for a pitch contest.
The majority of the startup events will have a pitch contest. And if you want to talk about your startup on the stage, you need to work hard.
Right after the call is finished, update your LinkedIn profile (if you haven’t done it already). Then start preparing for your pitch deck.
If you have a mobile application, then share a link to it. If it is some other product or service, make a well-thought introduction video that highlights what your product is about and why the users will like it.
Then, you should prepare answers to some other basic questions. Despite you will need the answers to these questions later while having a conversation with investors, scouts have to ensure that you have the right answers beforehand.
You may also need to submit a small video to the event organizers. And do not spend too much money on hiring a videographer. Just keep it simple yet informative.
You may think, “What are the benefits of working this much, giving interviews, passing tests, preparing a pitch deck, and presenting it?” It is the number of leads and contacts that you will collect with the help of the event.
Such events as WebSummit and Collision gather about 70,000 and 30,000, respectively. That’s why performing on the stage is like making a wildest dream come true.
You might have seen AngelList being widely referenced above. Let’s clarify what this platform is.
AngelList is a comprehensive platform that helps entrepreneurs, angel investors, and job seekers.
The founders can create their profiles and approach angel investors. Meanwhile, the angel investors can build their portfolio of investments so that the founders can find them.
The job-seekers also get an excellent possibility to search for new jobs and get a chance to work in like-minded startup businesses.
There are a lot more, and many others may emerge in the nearest future.
Getting online with your idea will help you reach out to potential investments and connect with the right people. So, utilize these online platforms for your benefit. It can increase your market outreach, become known, and push investors to approach you.
An online profile is a more natural way to reach out the potential investors for your startup. But you have only one shot here.
Your startup profile, on whatever platform you choose, must be engaging, attractive, and able to convince the investor to contact you.
To do that, you must follow certain steps:
- Create a profile that the investors cannot ignore.You might have read executive summaries of influential organizations and noticed how they summarize everything that is done in a few words. Compare your profile introduction to such a review.The investor won’t have a lot of time to read your story and description of how and why you decided to be a founder. Instead, they are more interested in what you do and if it is profitable or not.
- Assume that you are presenting your pitch deck to the investors. Write in a similar manner and tone.Present your product or service as if you are selling it. And always remember to find a place for humor. Don’t keep it too mundane or too exciting.Your description should be valuable to the readers. Try to keep them on the hook.Take a look at this detailed Balance Smb excerpt on how to write a company description for your business plan.
- Share it all: As long as you are keeping your description engaging, you can share everything you want with the investors. When it comes to investing in a startup, they will need a lot of information.It may include the description of the working process, your product, its values, the market position, demand, supply, growth prospects, price, profits, sales, team, location, market, etc.Include as much information as you can so that the investors get all the answers to their questions.
- Do not use characters to present your growth numbers. If you have made sales at an amount of $100,000, do not write it as $100k.It will make your profile more impressive. Besides, if any big and well-known company or brand is your customer, add their names as well.You can also ask for a review from the listed company and add it to your company description. It will help the investors know that your product is authentic and scalable.
- Traction: Another thing that you should mention in your description is who your customers are and the number of them. Segregate active customers from previous customers.If you have a viral coefficient, include it too. It will also help the investors assess the chances of your product to succeed.
- Add Screenshots and Videos: It is crucial to add pictures and videos about your product within the description. You can also add explanatory videos about your service.You can also add some charts and graphs to represent your growth rates and revenue. Plus, if you have a video of your pitch, add it as well.
Remember that you don’t have to add PRs and news websites mentions in the description. PR publishings are paid for in most of the cases, and, hence, won’t make any difference.
Business Incubators and Accelerators
Business incubators and accelerators are common famous structures across local government funds, universities, public programs, or business schools.
Thus, you can easily find some of them nearby. Just use a Google search or other search engine you prefer.
To help you, we have collected the ultimate list of listings and aggregators of the U.S. and Canada business accelerator:
- MaRS database of Canadian accelerators
- Seed-DB list of Seed Incubators
- Shedd’s list of startup incubators
- WebArchive list of startups, including European ones
Remember that each accelerator has its own set of rules to be accepted in a batch. But all recommendations regarding preparation for the fundraising process help you to perform well.