If you are planning on setting up a new small business, you may wonder about how you are going to finance this start up. Generally speaking, investors have been helping small business owners to get their companies up and running for decades.
If you need capital and you do not have the means of obtaining it on your own through savings or personal assets, then an investor may be just what you need.
How to woo investors
The first thing that you will want to do prior to seeking investors is to formulate a clear and concise business plan. Without a well thought out business plan, you will have trouble getting a serious investor to pay attention to your funding needs.
Create a section in your business plan that clearly details your products or services and the intention that you have for your company overall. You want to talk about your background and skills and discuss your target market and how you plan to reach them.
Finally, detail your marketing plan and discuss how much capital you need and why you need it. You can also network with people in your industry that you know or someone who also has a small business. Talk with people who can put you in touch with investors. Attorneys, accountants and bankers are good places to begin as these professionals typically know small business investors. You can also look online at crowdfunding sites or seek angel investors.
You should understand that there are different types of business investors for new small business start ups.
Business angels are typically wealthy individuals who invest their own money into business ventures with the hopes of a high return on those investments. They are much more likely to take on higher risk ventures if they see the potential for a return on their investment.
Venture capitalists are also investors who typically have large amounts of money to provide for capital. They do so in exchange for shares in your company. Venture capitalists typically invest £1million or more in a venture, although there are a few who will invest smaller amounts if that is what you need.
Your business will need to have a proven track record in order to draw the attention of a venture capitalist. If you are forming a new company, it can be difficult to get a venture capitalist to invest in you, unless you have a solid business plan with a product or service that they feel will offer a big return on their investment. If you can draw the attention of a venture capitalist, it will make your company look much more attractive financially to other investors, which could help you as you grow your business in the future.
Angels or VCs?
If you are not interested in large amounts of money as investments, angel investors may be a better way to go, particularly for new companies as they take on higher risk than venture capitalists. If you cannot find investors for your new company start up, you can always go the traditional way of raising capital with bank loans or use savings or credit cards to get the funding that you need to get your new company started.