- Corporate Investors
- Friends and Family
- Venture Capital Firms
- Family Offices
- Angel Groups
- Angel Investors
If you’re an entrepreneur or small-business owner, and you need funding to launch or grow your company, the best way to attract capital is through angel investors and venture capitalists.
Angel investors are individuals who provide capital to entrepreneurs in exchange for a stake in their company. Some angel investors are wealthy business people who invest in early-stage start-ups. Others may be retirees with extra cash and an interest in investing in companies that are synergistic with their personal interests.
Venture capitalists (VCs) are also individual business people who invest in very early-stage start-ups. VCs are less inclined than angel investors to take a hands-on role in a company, but they play a crucial role in helping entrepreneurs build sustainable companies.
The seed stage marks the fruition of the planning stage of the company, which is now ready to attract customers. The most significant challenge for entrepreneurs during this stage is to carve out market share and develop strategies to repeat their successes.
The series A funding round will need to raise anywhere between $1M to $30M. Most entrepreneurs will gravitate away from individual investors and towards larger investment firms.
Attracting investors and securing funding for your start-up delivers a range of benefits. Investors not only increase your scalability but can also open access to valuable advice, mentorship, and contacts. Here are a few more ways funding during the seed stage can be critical to the long-term success of a start-up.
If a new idea is proposed by a start-up company, one of its primary objectives is to quickly expand its market share. Investing heavily in marketing encourages rapid customer acquisition, which an investor can help you accomplish with an injection of funds.
While some start-ups choose to finance operations with loans instead of seeking investment, traditional finance institutes often restrict how much money an entrepreneur can access. Most banks have a clearly defined level of risk they are willing to assume. Start-up investors are aware of the risks and are willing to take on more exposure for bigger gains and a share of the company.
A business loan needs to be paid back with interest, even before the start-up company makes its first profit and regardless of how successful it is. With seed round funding, Investors expect a share of the company’s future profits, but they do not need to be repaid during the early stages.
Starting a small business is exciting, but not all the funding has to come from your own pocket. Many new start-ups will consider a bank loan, but these can be notoriously difficult to acquire given most financial institutions have a high aversion to risk.
When the usual sources of funding are not available, you still have options for getting your fledgling start-up off the ground. Here are a few strategies you can use to find start-up investors for your growing business.
Angel investors and venture capitalists are the two primary types of investors in today’s start-up investment market.
Angel investors are individuals who have invested in founding companies in exchange for equity ownership. Venture capitalists, on the other hand, are large pools of money that invest in teams with new technologies or products at an early stage of development.
Angel investors are part of the private sector, usually wealthy individuals willing to put money into the early stages of a company in exchange for equity. Private investors will typically invest smaller amounts than what larger investment firms are willing to put on the table.
In return, they get a stake in the company along with the opportunity to have significant role in the company (such as a seat on the board of directors). In return, angel investors typically have expertise, experience, and contacts you can tap into.
When you are raising money for your start-up, you need to build a list of potential investors to pitch your business ideas.
Building a targeted list of investors will improve your ROI because you are less likely to deal with a string of rejections. So, each round of funding will go much quicker.
A highly targeted list will improve your results, but how do you go about creating a list of investors?
The pitch deck is your company’s story condensed into about 5 to 20 slides. Once you connect with an investor on your list, the pitch deck is one of the first items they will ask for during the meeting.
Reviewing the pitch deck will give potential investors an idea of whether your start-up is a good match for their investment thesis.
An investment list should include a diverse variety of funding sources, including:
Investors will have more interest in a business plan that aligns with their investment thesis, which is a document detailing the research and analysis of a start-up and its potential for profit. The main features they are looking for are a cohesive team, a large market, and a competitive advantage.
When you are filling out your list of investors, you are attempting to only include the ones that are actively seeking companies like yours or specific matching characteristics, which could be:
Industry Sector: Some funds will focus on a particular industry, such as health or construction.
Shipping: A hardware product reliant on shipping increases the risk that your start-up can deliver a working product.
Demographics: Many investor funds will focus their investments on a specific demographic. If your company’s primary market is international, there’s no point in adding investors who only fund start-ups targeting the local U.S. market.
Revenue: Many investors will only consider companies with established revenue streams.
Filtering out investors you know won’t align with your ideas will save you time and get you closer to a yes much faster.
According to Medium, your seed stage search should plan on connecting with between 100 to 200 potential investors. The more investors you connect with, the more investment you will attract.
To put things in perspective, Pandora’s founder pitched to more than 300 VCs before getting their first, yes, which shows you how much of a number’s game sourcing investment is.
Most new businesses during the seed stage will spend upwards of 20 hours a week meeting hundreds of investors before finding an investor who will be willing to take a chance on your company. It’s easy to get frustrated and consider the possibility of giving up.
When you have defined the criteria for suitable seed round fundraising, it’s time to fill your funnel and start connecting with investors.
One of the most efficient strategies to do this is to use a database of investors like AngelMatch.io. Featuring a database of more than 90,000 angels and venture capitalists, AngelMatch puts thousands of potential candidates within easy reach.
The database contains investors interested in all types of industries, from fashion to Blockchain, every start-upwill find a long list of highly qualified leads to connect with and make their pitch.
Filter your investment options so you only connect with investors who will be a good fit for your company. Quickly find the best through filtering by investment stages, investment funds, locations, and interests.
Why waste days Googling angle investor or VCs and potentially missing out on the finance your start-up needs to get to the next level. Visit AngelMatch today and try it out all its features for free.