There are lots of reasons a business might turn to outside investors for capital. That comes up most often with startups, but occasionally even with more established small businesses. Investors might be friends and family, angel investors, or venture capitalists. Startups tend to go with investors when they can because it’s hard for them to get business loans. And established small businesses will occasionally look for investors, even though that means sharing ownership, instead of standard business credit. In line with this, here are tips for finding outside investors for your business:
Don’t do anything in bulk
When seeking funding, avoid email templates like the plague. Serious investors don’t read executive summaries or watch a pitch—much less read a business plan—when it looks like it’s being sent in bulk to multiple investors. That idea dates back to the 1980s when people imagined that investors were looking at business plans coming in unsolicited. Actually, they weren’t, but sometimes they pretended they were. Not anymore.
Do your research first
For getting funding from friends and family, the best thing to never do is ask your people directly whether they’d invest or not. Instead, describe the business and ask them who they know who might be interested. That’s less awkward by good measure if your people aren’t interested. They can promise to think about who might be interested, without saying directly that they aren’t.
Approach a select few target angels
Be patient. Look first for introductions by checking with people you know who might know them, alumni relationships, business associations, public speaking dates, and any contacts in the companies in which they’ve already invested. Don’t be afraid to submit to groups using their website form or call their switchboards, but keep that as a last resort.
Have an extremely good tag line
Start with the elevator pitch and get the key points down, but the theoretical 60 seconds of the classic elevator pitch is too much. You need to be able to describe your business in a sentence or two and that sentence has to be intriguing.
Have an extremely good quick video
Put together an excellent quick video or one-page pitch, and send that as the follow-on email when you talk with an angel or get an introduction. Expect the real information exchange to happen in email. The expected follow up to that quick three sentences is a summary, in email. These days, a great video works better than an email summary.
Have a business plan ready
The business plan is the screenplay; the pitch is the movie. Don’t do the plan too big or too formal because it’s not going to last and should never be older than two to four weeks. Don’t swallow the myth about investors not reading your plan. The truth at the core of that myth is that investors will reject your business without reading your plan—but they won’t invest in it without reading the plan.