A good idea isn’t enough to get a business off the ground. It takes some capital to get up and running, and that has to come from somewhere—typically investors. If you have a business that has a solid plan, a path to profitability, and a market niche ready to be filled, but you just need an infusion of cash to get the ball rolling, here are a few of your options for finding investors to help your dream become a reality.
1. Angel Investor Networks
An angel investor is an individual or group who loans the capital for a start-up in exchange for a piece of equity. If you’ve seen the television show Shark Tank, you’re familiar with the basics of what an angel investor does, but the off-screen reality is less craven and competitive. Many angel investors, instead of angling to find the best pieces of equity before others do, actually put their heads together to form angel networks that pool their capital and research new firms together. And a good angel network does more than just loan you money. Many will also guide you through the process of starting your business, connect you with important industry contacts, and help with bookkeeping. Groups like Angel Capital Association, Angel Investment Network, and Funded.com are a great place to start.
If your idea is easily digestible and doesn’t require an MBA to comprehend, you might be able to use crowdfunding to generate your startup cash. Major investors conduct endless research to determine if your business has the potential to be profitable because they’re hesitant investing considerable amounts of dough—but crowdfunding lets you source that money from a lot of different people, who don’t need to deliberate as long about throwing you a few dollars. Crowdfunding financed the game-changing VR headset the Oculus Rift, along with a bevy of other successful startups. Craft a good pitch and set up a page on Indiegogo, Kickstarter, or OurCrowd, and see if you can get enough people on board to fund your business.
3. Private Equity Firms
The most established way of funding a business may not be as stylish or easily accessible as crowdfunding, but it still has its merits. Private equity firms have boatloads of cash to throw at businesses they think will be lucrative, so if you’d like to score an investment from one of these firms, you need to have a detailed business plan with an eye on profitability and scalability. That’s because they’re looking to sell their stake in the business after your company gets a whole lot bigger. If you’re trying to start a small business, you’ll have trouble finding a private equity firm that will bite, but if you’ve got your eye on profits in the millions, there are nearly 2,100 companies in the US that invest a combined $300+ billion every year. Assemble a convincing business plan and you could get a piece of that pie.
4. Local Entrepreneur Communities
Although it’s the Internet age, people still place a lot of value on geographical locations and groupings. Investors might be a lot more likely to provide you with some capital if you’re a part of their city, especially if your business could generate jobs for the local economy. Look into the entrepreneurial community in your area—there are probably Facebook and LinkedIn groups for entrepreneurs, as well as conventions at which people gather to discuss and promote their projects. Meeting someone in person gives you the chance to really sell them on your idea, and that’s an opportunity that you might only get in the regional business community. You can start by reaching out to successful local business leaders for advice; they might be able to direct you toward investors, or they might take a shine to your idea and endow you with some funding themselves.
An incubator is a chamber with a controlled environment, in which a premature baby can grow until it becomes strong enough to live on its own. Business incubators operate in a similar fashion, providing startups with some insulation from the harsh climate of the outside world as they get on their feet. While angel investors often give some advice and guidance, incubators help with every step of the start-up process, from funding to scaling up production to marketing. They’ll guide you along the path to profitability and help you avoid common startup hazards, helping you decide if and when to pivot and even connecting you with other investors—all in exchange for a bit of equity in your company, of course.
The entrepreneurial spirit is a powerful thing, but it requires some real-world resources to create anything concrete. Without some funding, your business can’t get on its feet and start generating revenue. Luckily, you have options! Explore the funding sources above and decide which type of investment you think will be best for jump-starting your business.