Your idea is killer, now how do you find investors? Every startup needs funding, some more than others. Many new small businesses are able to launch by bootstrapping, but sooner or later you might need capital to take your business to the next level. You may find yourself wondering how to find small business investors and where to find them. As a new startup founder, you might need to know where to find angel investors and how to attract their attention. A more mature startup might ask the same question about venture capital. There are ways to take some of the strain off your finances, either through investors who only earn money when the company makes a profit, or loans with lower interest rates. No matter how great your product or business idea, how lean you can operate, and how big you’ve grown already, more capital and financial leverage will almost inevitably be a necessity. Even the best funded and hyper-successful billion-dollar startups have been engaging in more fundraising rounds than ever before.
These are the most common ways to raise capital for a new business.
1. Bootstrapping
2. Friends and Family
3. Angel Investors
4. Venture Capital
5. Crowdfunding
6. Small Business Loans
-Bootstrapping
Bootstrapping is the process of self-financing your own business. While you likely won’t be able to finance your business entirely on your own, it’s often the best place to start—especially if you plan to see additional investment down the line.
Potential investors want to see that a small business owner has skin in the game. They want to see that you’ve believed in your business enough to invest your own money into it. Why should someone else believe in you with their money if you haven’t first shown belief in the idea yourself?
-Friends and Family
Once you’ve exhausted your own resources, consider whether your existing relationships with friends or family might be funding possibilities. It should be easier to convince someone who already knows you to invest in your idea than a complete stranger. Be prepared to give them your business plan and answer their questions. Then hone your material with the information their inquiries and responses illuminated and thank your lucky stars that you got this preparation time before approaching strangers.
-Angel Investors
Angel investors are wealthy individuals who invest their own money into fledgling businesses, often in exchange for equity. The benefits of angel funding are that it can provide you with substantial capital to develop and grow your business.
-Venture capital
Venture capital is a form of private equity that typically invests during later stages of startup growth, either in exchange for equity or a convertible note (a type of bond that can be converted to common stock or cash, once the company has more established value). A venture capital firm looks for startups with massive growth potential so they can gain a solid and expedient return on investment.
Securing venture capital is highly competitive, and it typically comes with a lot of pressure, so you want to consider this option carefully before pursuing it
-Small Business Loans
The final method of securing capital for your startup is through small business loans. Small business loans come with a higher cost of capital—you’ll be expected to repay the loan with interest—but they also don’t require you to give up any equity in your business.