Crowdfunding

Growing a business is hard. There are a lot of factors that you need to consider, including developing a financial plan, determining a timeline for upgrading equipment, and investing in product development? There is also the possibility of outsourcing some business tasks that take particular expertise, like accounting and bookkeeping, marketing advisors, and a virtual assistant. All of this costs money upfront that will help you run your business smoothly. This is an investment that will be worth it. There are many ways to fund your business, with finding investors being a major one. 5 ways to find business investors Business investors can be organizations or individuals who put up capital to start or grow a business. In exchange, they will gain some control over the business, quantified as a percentage. Business investors will take part in business agreements and other investments with the goal that their own investment will yield a good return. How do entrepreneurs go about finding investors? 1. Make sure your company fits the profile When you start researching possible investors, the first step is to make sure your company fits the profile. Similar to programs and grants, an investor will be looking for companies that fit a particular market in which they are interested in investing. They may be looking for a company whose equity meets a certain financial threshold while some investors are specifically looking to invest in a startup. 2. Get your business ready Once you’ve zeroed in on a potential investor for your company, now is the time to set yourself up for success. Think of preparing for a big job interview, or better yet, a grant application. When getting your business ready for potential investors, you will need to ensure you are in a secure financial position even if you are looking for extra funding. Carrying a manageable amount of debt to capital ratio, excellent credit, having a strong business plan, and even for new startups, having a proven sales history will all make you look appealing to a potential investor. 3. Do your research and compile a list As a new entrepreneur, you’re probably already a savvy researcher. Here’s another example of how research can pay off. Researching how to find investors and how to approach them can start with an internet search, but don’t exclude business forums, your local business community, and other programs like Crunchbase. Fundraising platforms are also a useful research resource. Once you’ve done your research, start compiling a list of potential investors. As you do so, ensure your company fits the profile. Some investors specialize in particular niche markets. 4. Start building relationships It can’t be stressed enough that building strong relationships is an integral part of growing a successful business. No matter if your business is a sole proprietorship, a partnership, or an incorporated company, you’ll need those relationships for networking, information, advice, and yes, even landing a solid investor. Relationships can be found in a myriad of ways, thanks to the internet. Not just within your own community, but social media has closed the geographical gap in business. That means your business relationships can be anywhere in the world and come with all kinds of experience. 5. Work on your elevator pitch No one loves the elevator pitch but unfortunately, whether it’s delivered orally or in a business investment proposal document, you’ll need a solid and catching elevator pitch. It’s a business planning tool that is always good to have in your back pocket. A pitch is basically a proposal of a project or business. Depending on the complexity, a pitch can mirror a business or grant proposal. A successful pitch will have the following components: Demonstrates clear concept and vision Tailored to your specific audience (what type of investor are you pitching to?) Clear purpose and summary A sense of passion A pitch can also include an executive summary similar to one found in a business plan. 9 places to find investors 1. Through your industry friends No matter what your business goals are, networking is essential. Making friends within your industry—even the competition—is well worth the time and effort. Networking allows you to learn about potential investors, what they are looking for, and how to go about approaching them. Industry friends can also give you solid advice on what to do and not to do, as well as expand your network. 2. Venture capitalists (VCs) Venture capitalists (VCs) are similar to angel investors but instead of individual, wealthy, and private investors, they are generally a group of professional investors who invest venture capital on behalf of clients who are looking for investment opportunities. Venture capitalists are beneficial for entrepreneurs because they offer a steady and reliable source of capital along with years of business expertise. They are savvy with numerous business decisions as your company grows and in some cases can provide support in areas such as legal, tax, and personnel. Venture capitalists can also expand your business network which helps you connect with your business community. Business communities offer a lot of learning opportunities which is an invaluable resource for a new entrepreneur. 3. Angel investor networks Angel investors are a specific type of business investor. Like many investors, angles exchange funds for a share of the business, earning them a particular amount of control over decisions. The purpose of angel investors is to earn a tidy profit from their investments as a percentage of business profits. As your business grows, so will your profits and therefore investor profits will as well. Angel investors are usually wealthy individuals (think “Shark Tank” and “Dragon’s Den”) who invest their own money into business ventures such as yours. This is different from a venture capitalist where angel investors generally invest money into new businesses rather than ones that are already established. Finding an angel investor can be daunting but there are resources entrepreneurs can turn to. There are angel investor databases, such as the Canadian Investment Network, a program that matches businesses with potential investors. But once you have one angel investor, a much wider network of other angels is unlocked. 4. Crowdfunding Crowdfunding is an almost $20 billion dollar business and has become a popular alternative to traditional funding for small businesses. Commonly known as the democratization of business funding, crowdfunding is a strategy of raising capital for newer businesses through small donations or investments from everyday individuals who are generally not wealthy angel investors. Crowdfunding has now allowed thousands of businesses to raise money for their business without the use of traditional investors. There are a few crowdfunding platforms to which businesses can turn to procure funds: Kickstarter Indiegogo Crowd Supply (for tech startups) Wefunder 5. Incubators and accelerators Incubators and accelerators are specialized types of resources that are geared specifically to help entrepreneurs prepare for when they look for investors. An incubator helps entrepreneurs formulate solid business ideas, work with a business plan, and generally work on a flexible schedule until the business idea or product is ready to pitch to investors. Accelerators do exactly what they sound like: accelerate the growth of existing businesses. Some examples of incubator and accelerator resources are: InBIA Creative Destruction Lab DMZ Extreme Accelerator 6. Your city’s entrepreneurial community Municipalities always want commerce to boom and that means small and medium-size businesses. With more consumers looking to shop locally, municipalities are reacting to this by helping entrepreneurs with resources and money. Through these municipalities, there are local business networks such as business owners associations. Sometimes these networks and organizations will help advocate for small business owners while also providing assistance with pitches and grant proposals. 7. Super angel investors for startups Super angel investors are similar to angel investors and venture capitalists. The major difference is that super angel investors raise funds like venture capitalists and invest early in new businesses. Super angel investors are usually professionals who make their living off investing in new businesses. Super angel investments are a particularly useful resource for new entrepreneurs who are developing a product or service. 8. Through mentorship programs Becoming an effective entrepreneur and running a successful business takes knowledge and savvy. Sometimes new business owners can get bogged down with all the moving parts of running a business, particularly when it comes to investors, financials, and funding. Even something like incorporating your business can be daunting. Business mentorship programs are a great way to not only gain business knowledge through personalized guidance but to access potential investors. Part of mentorship programs is for the mentor to guide the mentee through the process of looking for investors, to position themselves for success, and developing their elevator pitches. There are plenty of mentorship programs in Canada through organizations like GrantMatch. 9. Private equity Private equity or private assets are alternative investments that come from private credit, infrastructure, and private real estate. For the most part, private equity investors and investments are less frequent but can yield strong returns. Private equity can also take the form of hedge funds where incorporated companies “go public,” meaning they operate in public stock markets, allowing private individuals to purchase stocks in the company. The takeaway Taking your business to the next level can feel daunting, particularly when you need to raise funds. Investors are one way to do that and often come with the benefit of business savvy and the capability to expand your network. Securing investors can help small and mid-sized business owners take their business to the next level.

Crowdfunding

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