How Do I Raise Money and Find Investors for My Business?

Richard Parker  |

Any business starts off with a lot of confidence and will to work on the part of the entrepreneur. However, that is not what keeps the business going. Capital forms the bloodline of any business. Lack of capital can lead to diminishing or even no operations in the business which will ultimately result in closing down of the particular enterprise. Thus, how you collect your business finance and how much of it can be put to use in the day to day functioning of business determines the success of your business. One requires regular cash flow in their business for continued success.

Explained below is a process that you can use to raise funds for your business.

Three Variations of Crowdfunding:

Crowd funding is an excellent option when you are looking to raise money for your venture. There are three types of crowdfunding, namely, donation, debt, and equity.

  1. Donation: A donation is when the public invests money in your business without having a stake in it. That is, they are not to be paid back anything- neither the principal amount nor the interest. The only reason why people donate in your venture is that they believe that your idea can work. However, for this form of crowdfunding to actually work in favour of your venture, your idea must be rock solid and thoroughly prepared for.
  2. Equity Funding: Equity funding is when people put money in your venture in the form of buying shares of your company. They hold one or more number of shares in your venture and are automatically entitled to a part of your total profits.
  3. Debt: Debt is when people invest in your business with the motive of earning some extra income. Debt capital is to be paid back along with a fixed rate of interest. So, these lenders get back their principal along with some interest.

Crowdfunding is extremely popular for the very reason that it is an excellent marketing tool. For people to crowd fund in your venture, people must be aware of the existence of your business and must have a strong faith in the working capability of the venture. This makes it necessary for your business venture to be creative enough to be able to attract public attention.

Two things to be kept in mind while searching for investors:

Finding an investor for your business can be an overwhelming task, especially since there are so many investors in the market. However, getting hold of one investor is a tough job. Most investors have received the same type of business pitch from a lot of people and are not usually ready to meet everyone to discuss the prospects of them being able to invest in their business. It is only when the idea of your venture is creative enough to attract attention that an investor will take interest in it. Make sure that your idea is out of the box and at the same time is achievable. Investors think twice before granting even a personal loan for self employed. Here are two effective tips on how to find an investor for your business.

1. Do your own research and shortlist investors:

The very first thing that you can do to find an investor for your company is to use your contacts in the industrial field and create a list of investors that you would like to pitch your ideas to. Once you have made a concise list of 30 to 50 names of investors, prepare your introductory pitch and approach them.

Pitch your ideas in the best possible way, explain what your aims are and how you plan to achieve them and then finally communicate about your financial requirements. If your idea is rock solid, your business loan eligibility increases and the loan is sanctioned to you.

2. Give investors a valid reason to reach out to you:

You need investors for your business and the investors need good business projects as well. This a two-way thing. Marketing is very important when you are trying to make yourself noticeable to investors. Put yourself out there, make yourself prominent in the investors’ interest areas, and build a marketing front that attracts attention.

It often happens that you never hear from the investors after a meeting. Do not let that stop you from following up in a professional manner. Reach out to investors so that they reach out to you. Most importantly, communicate effectively with them about any new product launch or venture improvement ideas and keep informing them constantly about any new updates. In this way, you can expect investors to reach out to you and grant you the business loan you need. MSME and SME loans are two types of business loans sanctioned by NBFCs. The loan value goes as high as Rs. 30 lakh and the business loan interest rate in India is kept low. These loans are perfect for small and medium businesses to expand and grow.

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The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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