At each stage of its life cycle, a startup needs funding. No matter how great the idea is, its implementation requires certain resources, both financial and material. Thus, each startup gets to thinking how and where they can attract such resources. So, let’s see what startups need and what they can do to get it.
Angel Investors and Venture capitalists are often mentioned together when talking about gaining capital for your company however, they are very different. An angel investor is a individual who uses their own funds to invest in a business. Usually they are successful business people. Venture capitalists funds a business with a pool of money from a professionally managed fund. Angel investors are individuals who contribute their personal money to support startups they find promising. Their primary interest is not only in receiving the return on their investments but also in wanting to keep the pace with the current trends and to share their expertise with younger entrepreneurs.
Venture capitalists, on the contrary, are companies and funds whose financial assets belong to other corporations or funds. In other words, they are responsible to their partners for the money they are prepared to invest into an idea, and this fact influences the approach they take to startup financing.
- Finding connections
The best way to get the attention of an investor is through a mutual connection. Investors don’t want to meet you, they want to be introduced to you. They come by many start-ups just like yours bombarding their emails and voicemails. In order to get ahead of everyone else, the best way to attract an investor is by finding a mutual connection between the two of you and use that as your in. Being introduced to an investor through this mutual connection will give you a much better chance at getting a meeting with them or even to have them answer your email. Out of the many start-ups that come their way, the one that will peak their interests is the one that was referred to by someone they know and trust
- Use your Network
Surrounding yourself with the right people will become useful to you and your start-up. Creating a network filled with credible people and other entrepreneurs will be advantageous because you can turn to them for help, or they can point you in the right direction. This will serve as an extremely beneficial tool. You can create a network of people by attending workshops, start-up events (ie Startupfest), accelerators or really any networking events. There are so many different events you can attend to that are made specifically for networking. So get out there and make as many connections as you can because you will not regret it.
3. Find an investor that is also a partner, not just a check
It’s important to do research on the investors you want. You don’t want to reach out to an investor who has no experience in the industry your start-up is in. Firstly, you will be wasting your time reaching out to these investors because chances are they are going to turn you down. Second, it will become of more value to your start-up if you chose an investor who has a background that correlates with your start-ups industry. An investor who can help make your business stronger whether through advice or industry connections and knowledge will ultimately serve you better than an investor who has money to offer and nothing more. Look into each investor and research what other start ups they have invested in.
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Have co-founders
When you approach investors, you’re not just selling them on your product or service; you’re selling them on your team. Having a good team in place will increase the chances at gaining the attention of an angel investor. It gives your company a bit more credibility knowing that it isn’t backed by just you. Not to mention, having a good team is more attractive as each member brings a different background that can contribute to the success of the company. An investor will be ore inclined to invest in a company that is able to deliver in every aspect.
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Email
Once you’ve found your connectors, reaching out to them needs to be a sprint not a marathon. You need to set up the email in a way where you can get a quick yes or no response. Follow up within 4-7 days and if you get no response then you move on to the next person. Every email you send needs to be very clear and straight to the point. Everyone gets hundreds of emails a day so you need to be efficient with it. You need to have a clear killer subject line, make it short, forwardable. Give them an easy out therefore you get a quick yes or no response.
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