Seeking private investment for your new business is a very common strategy to raise capital. A private investor can help finance your business by giving you a loan in return for interest payments. However, an investor can also provide funds in return for equity. This means that the investor will be a part owner of your business.
Avoiding Common Mistakes
When you are seeking investors to borrow money from, it is bad practice to contact every investor whose contact information you come across. The reason for this is because not all investors will invest the same amount of money. In addition, not all investors are interested in investing in the same types of businesses either. Therefore, it is important to do your research and only contact investors who are suitable matches. However, before you even start to call investors, it is important to get your business model reviewed. Many private companies have business consultants who will go over your model with you to make sure that it is feasible before you start bringing investors into the mix.
It is also important that you do not paint an unrealistic picture of your business or its potential in terms of profitability. You should always be prepared to answer what type of figures your projections are coming from. If your business has been around for a while, it might be a good idea to bring historical earnings reports with you. If you are starting a brand new business, do some research and find out how new business start-ups in your industry are faring. Although it is important to strike the right balance between too much information and too little information, you want to be sure that this information is available in case the investors ask for it. Any investor's primary concern is profitability. Therefore, if you are including information that is not pertinent to this, it might be a good idea to take it out of your presentation.
During the interview, it is important to stay confident during the question segment. There may be times when you don't have an answer to the investor's question. To minimize your chances of finding yourself in this situation, make sure that you are very comfortable talking about your business model. In addition, you should have an idea of the specific demographic that you are hoping to go after in the market. You should also be aware of who your main competitors are, and some of the strengths and weaknesses that they have.
Finding Investors
There are many different resources available for start up businesses seeking investors. The best place to start is usually in your local community. There may be different Business Development Centres or local experts who are willing to talk and offer advice. In addition, you can also check out your local Chamber of Commerce for a list of potential investors. The reason why it is a good idea to stay local is because you will usually face less competition and have an easier time talking about the local economic climate.
Another place to start your search is a Trade Association. Most businesses will be represented by a trade association, and this is a great resource for small start ups to talk to professionals and find out what some of the challenges facing the industry has been. They will also usually have a list of investors who are interested in providing capital to start ups in the specific industry.
