How to Find Investors for Startups

Find Investors for Startups

How can startups raise money?

Startups can find investors by exploring different financing options:

  • Approaching Venture Capitalists (VCs).
  • Pursuing "angel" investors.
  • Consider pitch meetings.
  • Attending various gatherings.
The startup should have a validated MVP that solves a real problem, industry analysis, a Go-To-Market strategy, and most importantly, a reasonable financial ask and valuation number backed with data and science.
Each startup needs a strong financial foundation to take off and succeed. CB Insights indicates that one of the most common causes for startups to fail 29% is a lack of finance and personal funds, hence it is essential to secure the necessary funds for your startup.
However, remember that starting funding does not have to come entirely from you, the company owner, or through a traditional bank loan. Identifying and obtaining investors for your firm might be critical to its success.
Moving forward, we will explore the usual steps that should be followed by entrepreneurs looking to finance their ideas.

1. Commencing your Investment Journey

As with many initiatives, the beginning is one of the most difficult steps. But once you get started, you will see that there are many opportunities for growing your business!

Start early

One of the secrets to successful financing is to get started early. Do not wait six months into development before pursuing finance for your project. From the beginning, be on the watch for investors, once you have begun seeking, never relinquish it.

Commence Bootstrapping

Until you find your ideal investors, you should try to find the means to build up your business by yourself. Bootstrapping is essentially trying your best to develop your company from the ground up using just your own resources. Without sufficient funds or interested investors, there is no other choice.

The core concept of bootstrapping in company strategy is to borrow as little funds as possible or none at all. During this time, an entrepreneur develops the concept or business till it attracts early investors based on first figures, metrics, and KPIs.

Construct the MVP

If you’re bootstrapping your project, you should construct a functioning prototype that looks and feels precisely like the concept of your dreams, often known as a Minimum Viable Product (MVP). An MVP helps enterprises to assess market demand for their product, learning whether prospective consumers need and will utilize the product without having to spend big sums of money.

This way, you can gain an understanding of your customers’ interest in your concept without fully developing it. The sooner you can find out whether your product will appeal to customers, the less effort and expense you spend on a product that will not succeed in the market.

Overall, an MVP is created to attract the financing required to take it to the next level along the development route.

How much capital would you need to acquire?

The results of a Kabbage survey reveal that a third of small firms start with less than $5,000.

Another study conducted by the Wells Fargo Small Firm Index found that the typical small business needs about $10,000 in launch financing during their MVP Stage

2. Leveraging Valuation

Moving ahead, approaching investors with a proven value expands the startup's fundraising prospects. Ultimately the outcome of the valuation exercise will assist startups in verifying and comprehending their strengths and shortcomings.

Core Features of Startup Valuation

Startup valuations highlight a business's capacity to:
  • Raise further funding
  • Exceed consumer and investor expectations
  • Achieve the next development milestone

Startup Falcon – the Ultimate Valuation Approach

Whether you are in the pre-seed stage or are just offering stock options to your staff, understanding the various startup valuation methodologies can provide a plethora of benefits , Startup Falcon helps you put your startup on the scale, by offering the ultimate Valuation services. After all, reaching investors with a proven value broadens the startup's financing prospects. The outcome of the valuation exercise will assist startups in verifying and comprehending their strengths and shortcomings.

Factors considered by Startup Falcon Valuation

Overall, Startup Falcon valuation will:

  • Process the data entered through the form.
  • Benchmarking the startup to comparable transactions in the same sector and country
  • Finally, the tool will determine the final value number by using one of the four qualitative techniques.

Eventually, the following results will be provided in the aftermath of the valuation process:

  • The final amount of valuation
  • Data on benchmarks and trends
  • Startup executive summary

How should you Proceed with Valuation?

If you have genuine revenues, you may begin with solid economic figures. However, in the context of fundraising, your business is ultimately worth whatever you and your investors agree on.

Most angel investors and venture capital companies use a variety of algorithms to determine a business's pre-money value, or how much it is worth before they invest. Hence, Startup Falcon assists bridge the gap between investors and entrepreneurs.

3. Exploring Financing Options

Moving forward, we will explore the most common financing avenues you can pursue your startup.

Contact Businesses or Academic Institutions in Your Field

This procedure may consume a significant amount of your time, since you are unlikely to discover an investor with only one phone contact. Indeed, you may need to make several calls or even attend business events to network.

However, if you continue exploring, you may come across someone who believes in your company strategy or product enough to invest in it. Alternatively, colleges that provide certificates, diplomas, or degrees in your profession may be a means to connect with prospective investors.

Attend Various Gatherings

To be successful in your fundraising efforts for your business, you must have substantial exposure. And, to increase your chances of being recognized by the correct investors, it is a good idea to attend networking groups and events where such investors congregate. Locate events in your area and arrange a meeting with possible investors in advance for the best outcomes.

Consider Pitch Meetings

Pitch meetings are one kind of gathering in which entrepreneurs assemble to showcase their company with a focus on their products/services.

Moving forward, you have a wide variety of options, such as:

  • Charity events
  • Conferences
  • Exhibitions

4. Investigate Equity Financing Options

Equity finance refers to the process of obtaining capital from a third party in return for a stake in your business. While selling a portion of your business to another party may not sound appealing at the initial period of your organization, it enables you to obtain money rapidly and utilize it to bring your items to market.

There are several sources of equity financing, including investment firms, online crowd-funding platforms, incubators, accelerator programs, and online communities. Private investors are individuals who seek company possibilities to invest in, often in return for shares in the underlying businesses.

Approach Venture Capitalists

Overall, a venture capitalist is an investor who contributes finance to businesses in return for various advantages, such as an equity investment, a seat on the board of directors, or a share of the company's future revenues.

According to data compiled from various sources, 2021 achieved new global venture capital records, totaling 621 billion dollars, an increase of 111 percent over 2022.

Pursue Angel Investors

Another option worth pursuing is engaging with angel investors. An angel investor is often a high-net-worth individual who is looking for potential new firms to invest in, typically in return for shares.

Upcounsel estimates that a standard investment can fall in the range between $15,000 and $250,000, however, this might vary considerably.

Convertible Notes

Convertible notes are another avenue for seed investors to participate in a startup. They begin as short-term debt and mature into stock in the issuing corporation. Investors provide loans to startups and are compensated with stock in the business rather than with principle and interest. Once a specified milestone is met, often when the firm is formally appraised for future investments, the convertible note automatically converts to stock.

When everything goes according to plan, startup enterprises with great growth potential provide an outsized return on investment. Investors may wind up with a large amount of stock at bargain-basement prices, particularly when convertible notes have a low valuation limit and a severe discount.

Bottom Line

Many firms fail to get off the ground due to a lack of finance. You may have a wonderful concept and the conviction that it will someday succeed and be lucrative, but you will need some startup funds to get it started.

What many company owners are unaware of is that bank loans are not the sole source of funding for their enterprise.

Approaching the Path Forward

Ultimately, numerous enterprises may be able to get funding from investors. This may seem difficult, but if you learn how to approach each type of investor, you will be in the best possible position.

By devoting time to developing a rock-solid pitch deck, a data science valuation, and pursuing multiple fundraising avenues, the sky will be the limit for your business!

Keywords: startups, fundraising, investment, valuation, bootstrapping, angel investor
Startup Falcon . 2022-04-02