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The Key to Acquiring Small Business Investors | Finding and Retaining Investors

Investors provide starting capital for businesses, guidance for business development, and ensure that capital is invested correctly. Finding investors is often the key to starting or expanding a successful business. Partnering with investors is very important for fostering the growth of a business. Therefore finding and establishing strong relationships with small business investors can result in growth in your business which will increase revenue. There are several types of investors: Angel Investors, Personal Investors, and Venture programs. These are different types of investors who will have varying goals, but they all share the same purpose and goal: investing in a company because they believe it will grow and become profitable. Many established companies have started as small projects and expanded with the help of investors. Investors can be very beneficial partners for small business owners as they have knowledge of the difficulties of developing a business. In addition to this, they may have valuable input for future business decisions.

A diagram showing the difficulty levels of obtaining different small business investors - angel investors, personal investors, and venture capital

What are Small Business Investors looking for?

It is important to understand what Investors are looking for before they provide capital. There are several things that all businesses should consider before reaching out to investors and asking for a specific amount of money.

A diagram showing the different factors small businesses should consider before reaching out to small business investors

All the above-mentioned things are very important and they should definitely be considered before approaching investors. Investors want to be sure that their investment will be profitable. They should clearly see that the company has developed an effective business model, a clear understanding of its target audience, and an adequate marketing plan. Investors are especially interested in new, innovative ideas. In other words, they enjoy the idea of investing in something that is new to the market and has a huge potential for growth. Investors expect businesses to have a straightforward answer to their needs from the investment firm. It is always helpful if the individual that is approaching them has experience working in a specific field as investors will find value in the experiences. It is also essential to define what issue your business will solve and what its competitive advantage is. For example, if your company provides a solution to a common problem, communicate this to the investor as it shows your value.

Debt Investors vs. Equity Investors | Small Business Investors

When looking into potential investors, it is important to understand the difference between debt investors and equity investors. When working with a debt investor, they are lending you money with the expectation that you will pay it back in full with interest. Usually, your company will be put up as collateral to secure this loan. When dealing with equity investors, they are purchasing a percentage of your company and will make a profit whenever they sell their share of the business. Debt investment can be good in many cases as you retain full ownership of your business. However, it has a few disadvantages as you need to pay back the debt and you usually need to provide collateral. Equity investing also has advantages such as not having a loan to repay and forming a partnership with your investors. This also comes with some drawbacks such as having to share profits and losing control of parts of your company.

A picture of someone holding a lot of cash - symbolizing small business investors ready to allocate funds

Angel Investors: Specialized Small Business Investors

An angel investor is a person with a net worth of a few million who is interested in supporting small businesses/startups by offering investment. They are often former entrepreneurs who make investments to make a return on their money and to participate in the entrepreneurial process. Platforms like AngelList, FundersClub, CrunchBase can be very helpful for finding an investor that fits your needs. Many angel investors also specify the type of businesses they would like to invest in. They will usually ask for a pitch deck and one-pager to get an idea of your business before beginning to request more information about your business.

An angel with a dollar sign - symbolizing an angel investor, which are small business investors

Venture Programs

Venture capitalists are considered to be the most selective type of investors. In order to receive their funding, companies must fit into their strict criteria of target companies to invest in. Venture capital is most effective when companies are trying to become powerful enterprises. Their goal when investing in your company is to facilitate as much growth as possible. Keeping this in mind, it is very important for companies to identify their goals for the future of their endeavors. If you are attempting to develop your business into a small family-owned company, venture capital is not the correct choice. In addition to this, timing is crucial to receiving their investment. The company needs to be established enough to promise a successful future but can not be too big to the point where the investors think your rapid growth period has already passed. However, if you reach out to them too early, they might determine that the risk of investing in your company outweighs the reward. It is important to note that this is one of the most difficult types of investment to obtain. In addition, the process of seeking this investment is very time-consuming.

A picture symbolizing the large amount of money venture investors, a form of small business investors, can  provide to small businesses

In conclusion, finding the right small business investors will provide illustrious opportunities for your business. Whether that be from the capital they provide or expertise they contribute, good-fit investors will pave the way for your business to reach the success it deserves. It is important to become educated on the different types of investors to figure out which ones are the best for you. This article provides you with the foundational knowledge you need for your investor search. In order to showcase your business properly to potential investors, you will need to appropriately display your finances - click here to learn more about creating financial statements.


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