You’ve come up with that sensational idea, you know it’ll work, you’ve gathered people you trust, some have become partners in your startup, and it’s time to grow and scale the business. Just one issue remains: how to get small business investors.
You’ve tried everything: talked to parents and wealthy friends, contacted dozens of investors, managed to set up meetings and present your business, developed an awesome elevator pitch and even then, no investors!
How is this possible, you wonder. If your business has everything right, how do these guys not see it?
So, how do you get small business investors?
There are several tips for this. First, is your business plan impressive enough to close? One very well used strategy to demonstrate this is the famous Startup Canvas, which is a fast and practical way to present this information.
Another fundamental factor that many investors want is that one of the partners is involved in the area of technology. Technology is a very influential factor in the success of new companies. With an entrepreneurial partner commanding or knowing the area well, the risk of business failure may decrease considerably, which will be taken into account by investors.
But how about rather than breaking your mind trying to figure out on your own how to get small business investors; you listen to the advice of someone who has done it successfully more than once, and in an emerging market that faces serious investment restrictions such as Brazil?
How To Get Small Business Investors
Marcus warns that there are several types of investors: those who “invest in a PPT”, others who only start talking if the company is already showing some revenue, and then those who demand that break even has already been achieved.
The point is: There’s an investor for any type of startup or small business.
But is there a standard criterion for analyzing investments?
Marcus responds, excitedly:
“Yes there is. Every investor analyzes:
- Time: Perhaps the most important point. They will analyze the entrepreneurial history, the familiarity among partners, the level of intimacy among partners, the resilience. Time is everything, especially in early-stage startups.
- The problem the startup solves: Is it a problem of millions, perhaps billions of people? Is it a serious enough problem for people to pay for its solution?
- The Solution: Is the solution innovative? Do you have any kind of ‘Competitive Advantage’, such as being the First to Enter into the Market?
- Results: These can range from sales to vanity metrics (number of likes, visitors / month, registrations, etc). It’s important to secure some form of result.
It’s important to note that the level of business maturity directly impacts your company’s valuation. Another important point is that investment money is not a perfect remedy. If you haven’t found the famous ‘product-market fit’, money may not help at all! “
The 3 ‘If’s’ of how to get small business investors
Marcus also warns about his personal goals, his own financial situation and the revenue evolution stages of his business; and, how these factors influence small business investors decisions.
“If” number 1:
“If you’re looking for a partner and still thinking about leaving your full time job, maybe you should look for a Startup Weekend event or entrepreneurship courses.”
Check out: How to improve small business processes
“If” number 2:
“If you’re already a full-time dedicated part of your business, with partners, and some results, maybe you should apply for an acceleration program. You can even apply for an international program, such as Startup Chile, which in addition to financial investment, helps in business model development.”
Find out about several funds that invest in startups, in this site: CrunchBase
“If” number 3:
“If you already have consistent results (growth every month, double-digit revenue growth, staff hired, etc.), it might be worthwhile applying for angel-investment, or equity-crowdfunding, or even depending on the level of maturity, look for an Investment Fund, such as Redpoint.
At this level the recommendation is to access the investment fund as a startup to be invested in by the group”.
The models are complementary, one doesn’t exclude the other. Marcus, for example, participated in Startup Brazil and Startup Chile, as well as accelerators.
In February 2016, he secured an angel-investment for Pluga.
And you, now that you know how to get small business investors.
What strategy will you choose?