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.
Benefits of Finding Start-Up Investors During the Seed Stage
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.
Faster Market Penetration
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.
Take on More Risks Than a Bank Loan
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.
Seed Round Funding Improves Your Start-Up Cashflow
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.
Where to Find Start-Up Investment for Your Emerging Business
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 Versus Venture Capitalists
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
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.
How to Create a List of Investors
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?
Create Your Pitch Deck
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.
Investors to Add to Your List
An investment list should include a diverse variety of funding
sources, including:
- Corporate Investors
- Friends and Family
- Venture Capital Firms
- Family Offices
- Angel Groups
- Angel Investors
Increase Your Chances by Connecting with The Right Investors
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.
Load Up Your Funnel
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.