Finding An Investor For Your Start-up

3 Nov, 2010 Phil Featured, Money, Starting Up
Finding An Investor For Your Start-up

Financing a new business can be pretty darn daunting – as starting up a new venture can sometimes require a huge investment. If you are looking to start up a new business, you will need cash to get it off the ground and cover early finances. Early finances could include web development costs, purchasing stock, marketing, servers, etc.  Private investors play a crucial role of raising startup business capital to help your new business reach success.  Investors take a risk in investments, and take interest in the companies in which they invest.  This can be a % of the company or a cut of the annual profits.  Business  investors will invest in all kinds of businesses – and not neccesarily in their current industry – if it’s a good idea that they see can provide them a good return on investment (ROI), then they’ll invest in pretty much anything.

These small business investors look for companies that exhibit high-growth prospects, have a synergy with their own business in some way or compete in an industry in which they have maybe previously succeeded. Such investors are a good alternative to using your bank or other ‘venture capitalists’ for some cash-strapped small businesses. Finding investors for small business can be a hard task if you do not know where to find them. And once you discover where to locate them, the hard work will surely be worth it.  Here are some places for you to look for your investors:

1. Business Partners – Getting a partner is one of the first things to consider since you are looking at finding private investors to lend you money for your start up business.  You should think of someone you may know, like a family friend or someone else who runs their own business, who has money available that may want to go into business with you. You can also try to find potential partners by joining business clubs and associations.  The key to this is to find someone that thinks like you and who is willing to take the calculated risk of investing in your business.  The important thing after finding the partner is deciding if the partner will be active or silent in the business dealings and drafting a comprehensive partnership agreement that covers these points.  Remember, that you will both bring different types of expertise to the business.

2. Commercial banking
– You can apply for a private loan or a small business loan (SBL) through your current bank.  Maybe compare a few banks for the best rates of interest and terms.

3. Venture Capitalists
– These are people who wait for people like you to approach them.  If you have the right business idea that can make them money, they will give you money to invest, again for a share.  Many big companies started with an idea and venture capitalists that took a chance with them, ended up making both the venture capitalists and small business owners extremely wealthy.

4. Lending Clubs
– As the name states, there are clubs that lend money to start up business. They do require that you have a credit score.  Not the easiest or best option (as multiple people are involved), but hey – it’s still an option.

5. Angel Investors
– This particular group is similar to venture capitalists in that they are willing to take a chance and invest their money in your start up business, but will require you to keep them involved in the development of the business to ensure their investment pays off. Think of them as venture capitalists on a smaller scale (not necessarily a bad thing).

Finding private investors for small business has become much easier with advanced communication media, such as the Internet and angel search programs. These investors are valuable resources who can use their experience to guide your business in the right direction.

Always remember though, that if you business idea / concept is unique and precious, make sure that you draft up a ‘Non disclosure Agreement (NDA), to contractually prevent someone from stealing your idea.

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About Phil

Phil is creative director at PSM Digital but also freelances with web design and SEO in Manchester, UK. He researches and studies online business, along with the latest technological advances and development in design, SEO and social media.

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About The One Man Mission...

Hi I’m Phil. Welcome to my blog, where you’ll find useful information on web design, development and online business advice.  I’m a creative director for a digital agency in Manchester, UK and I also freelance web design also.  Currently setting up and developing a new online business, I am here...

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