Any business owner seeking out investment opportunities should already be proud. If you’re ready to take an investor’s check, you’ve already built a scalable business. That person’s investment will help you hire staff, scale operations, and fully realize your small business dream. But it can be intimidating to find the right investor — not to mention selling your idea as something worth spending money on. Luckily, we have some tips to find small business investors and feel more confident pitching them.
Our new Milestone, How to Find Investors, guides business owners through everything they need to know to prepare for capital investment, find investors, and land your pitch.
Here are a few quick tips to find small business investors as you get started.
1) Evaluate Your Business Needs
First off, determine if your business is ready for outside capital. Not every business is ready for investment, and every business isn’t suited to every form of capital. Save yourself time by asking a few important questions before seeking venture capital.
Here are some key questions to ask:
- Is my venture scalable? In other words, will your business model allow you to rapidly increase sales or revenues without requiring significant changes to how you do business? This is the key requirement for accepting venture capital. If not, don’t worry — grants, credit, and loans are still available and a great option.
- Do you know what you’re looking for? Before you step out the door, know exactly how much investment you’re seeking and what you plan to do with the additional capital. Investors will write you a check to support your goals, so ensure you have a clear idea of what you need to accomplish those goals — as well as the budget, revenue projections, and other supporting documentation to show you’ll have the resources to get there.
- Do you have enough time? Fundraising is a full-time job. If you’re devoting your full concentration, ingenuity, and social energy to wooing investors, you won’t have time to manage day-to-day operations. Ensure you have a co-founder, operations manager, or another team member who can assume responsibility. Without the help, your business could suffer.
Ready to go deeper on this topic? Prepare for capital investment now.
2) Do Your Research on Investors
Getting face-to-face with any investor isn’t too difficult. However, set yourself up for success by doing your homework and get your business plan in front of the right investor most likely to support your mission. The more you know about the investor’s background, portfolio, risk tolerance, and personality, the more likely you will have a match and sell them on your business.
Familiarize yourself with investors based on the following factors:
- Industry
- Stage of growth
- Values
- Geography
Don’t feel the need to learn their life story. However, a few key facts will help you prepare for a successful pitch that sets you apart from the competition that sends them generic outreach. The more you know your business — right down to its every metric and move — the easier it will be to find investors who align holistically and weed out those who don’t.
Once you narrow your investor profile, here are some places to start your search:
- Angel networks
- Affinity groups (by race, industry, geography, ethnicity, veteran status, problem sets)
- Family offices
- High net worth individuals
- Government funding sources
- Foundation funding sources
- Universities
3) Know Your Market Research
With any luck, you’ll line up a few meetings. Ensure you know what you’re going to say when the moment arrives.
Be able to anticipate — and answer — common questions from investors. That means having a thorough understanding of your industry and where your business stands against competitors.
Ask yourself some of the following questions before meeting with potential investors:
- What is your unique selling proposition?
- Who is your customer?
- What obstacles, if any, stand in the way of achieving your vision?
- What is the business opportunity presented by your solution?
Credible answers to questions like this will help you distinguish yourself.
Want more tips on sourcing prospects? Learn to find investors now.
4) Make a Compelling Sales Pitch
At the end of the day, investors are interested in making themselves money. They might not care about your incredible product if they don’t see a path to profitability.
To demonstrate this path, get your financials and internal data in order before pitching an investor.
Be prepared to share the following information:
- Profits year-to-date
- Monthly revenue and expenses
- Future financial forecasts
Furthermore, it helps to provide information about your team expertise, as well as any metrics to prove the traction your business has today.
Yes, sharing this information can feel revealing. But understand that investors want assurances that your business fundamentals are solid and there’s a clear path to profitability. Because remember: If your business can’t make money, it’s not a business. It’s a hobby!
5) Develop Quality Pitch Materials
In all likelihood, you have a solid elevator pitch that’s enough to pique an investor’s interest. But what happens when they’re ready for a deeper conversation?
Developing solid pitch materials ensures you can deliver relevant business information in a robust and concise format.
These two types of materials are essential:
Verbal Pitch
This is your short elevator pitch meant to catch someone’s attention in five minutes or less. Your verbal pitch should be tailored to each person, but the heart of the pitch should be about selling yourself — why are you the person to invest in?
Pitch Deck
Develop a short and professional pitch deck, no more than 13 slides. Aim to communicate key messages such as your business model, vision, and proof of traction. At the same time, investors are busy! Edit this document to deliver only the essential information in the most efficient way possible.
Have trusted colleagues review your materials before testing them in the field. Additionally, don’t be afraid to revise things along the way.
6) Pitch Investors and Refine Your Technique With Time
As you start pitching investors, you’ll learn a whole new form of etiquette.
For example, cold calls and cold emails are typically unwelcome. Peppering an investor with industry jargon or a long-winded pitch won’t get you far, either.
Instead, focus on building a relationship with investors before asking for money. Network with an investor’s portfolio companies to get tips and perhaps an introduction.
Most of all, hone your pitch until it’s tight, snappy, and confident.
Finally, take notes directly after your meeting about what worked and what didn’t. If you hear no 10 times, there’s probably a mistake or gap in your business plan. Investors are smart people, so put their feedback to good use.
We hope these tips to find small business investors help! Want more ways to refine your pitch? Learn to pitch investors now. For more small business tips and inspiration, create a free account on Hello Alice or subscribe to our weekly newsletter.