small business owner having a meeting with investors

How to Find Investors for Your Small Business

No matter how great your product or business idea, if you're a new business, how lean you can operate, or even how big you’ve grown already, more capital and financial leverage will inevitably be a necessity for a successful business. Raising money and reaching out to find potential investors is a business skill like any other, and chances are you will keep using this skill throughout your career.

So knowing the difference between venture capitalists, private investors, small business investors, accredited investors vs. non-accredited investors, angel investors etc, will help you when seeking funding. 

Keep in mind when securing investors for your small business, the person you’re speaking with has probably heard from many other small business owners, meaning you probably have some competition. So a key in locking down an investor for your small business is to ensure your pitch stands out. Investors need to be assured  their money is going into something not only profitable, but unique. 

Your pitch will be the first thing that introduces your business, so it needs to have them hooked within the first 10 seconds. Once you have their attention, you can start getting into the nitty gritty. 

After you nail down your pitch, you can move onto finding the actual investors. It might be in your best interest to tailor your pitch depending on the particular investor you are speaking with. 

1. Consider Friends and Family for Capital

A straightforward approach to finding investors for your business is asking friends and family for capital -this could be a great starting point for first time entrepreneurs or small businesses  Although this may seem easy enough, do not go lightly on creating a strategy. Even though you are already familiar with these people, your strategy could be the difference between getting the capital you need, or going home empty handed; a little strategy goes a long way. 

Carefully take the potential investors through your entire business plan, and ensure it contains as much detail as possible. Doing all the planning ahead of time (like market research, company description, target audience analysis etc.) and creating an elaborate presentation, will bring the potential investor a greater sense of comfort in giving you their money. 

Next, take them through a variety of options - everyone loves options. Give them the choice to either invest (this way they will end up getting money back when your business becomes profitable) or ask for a loan. You can create pre-set percentages for what you deem reasonable in terms of interest rates, but always be ready to negotiate.

If the person you're speaking with  likes your business idea, but feels like a loan is a safer choice, you could offer them the option of putting down a portion of their money as an investment and a portion as a loan! Always keep their options open.

2. Approach a Local Business

When approaching a local business for investment opportunities make sure their business will complement yours, and isn’t in direct or indirect competition with you. For example, if you are trying to open a gym, approaching a health food store is a great idea because the two businesses would help each other grow. 

On the other hand, if you're opening a gym, avoid asking any local business that sells exercise equipment people can use at home. Any fast food restaurants or other gyms are also probably off the table. 

Something to remember is that even if you think another business will complement your own, the other business owner may not see it that way. So be ready with a clearly defined plan on how both of you could benefit from each other. 

Another approach could be to attend industry conferences with other business owners who are ready and excited to network with you.

3. Find an Angel Investor

An angel investor (or angel funding) is a high-net-worth individual who provides financial backing for small businesses or entrepreneurs, typically in exchange for part ownership or equity in the company. Since angel investors are normally experienced in their field, they could also offer you mentorship and guide you to a more successful stage in your career. 

The funds that angel investors provide (typically the money comes out of their own pocket) may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.

4. Reach Out to a Venture Capitalist

Venture capitalists provide the seed money for high risk start ups or businesses that have already been running for some period of time and are looking to expand. Alongside providing venture capital, VC’s can offer advice, HR support, or office space to the businesses they invest in. 

In return for their investment they take a piece of the  company in the form of stock ownership. They would also normally receive a seat on the company's board of directors. 

Venture Capitalists control a pool of money from other investors (which is why they are also known as Venture Capital Firms), unlike angel investors, who use their own money. VC’s are also known to typically provide more money than an Angel Investor would.

5. Try Crowdfunding

Small business owners can use crowdfunding to raise money by receiving smaller donations from more people. These individuals donate their investment online, usually through popular crowdfunding platforms like GoFundMe, Kickstarter, and social networks like FaceBook. There are three main types of crowdfunding options: 

  • Equity crowdfunding— Investors will give money in exchange for either equity in the company, usually in the form of shares, or a percentage of revenue or profit from a specific product. This is usually best for newer businesses that have plans to grow. 
  • Debt crowdfunding—Here, investors lend their money to a business at higher interest rates. Since the individual amounts of loans are small, investors must mitigate their lending risk by spreading out their funds in smaller increments to a large number of borrowers. 
  • Donation/rewards-based crowdfunding— In this model, a business will set a fundraising target and ask the broader public for donations in exchange for perks, access, or receipt of the eventual service or product being developed. Should the target not be met, all funds will revert to the individual investors.

6. Join a Pitch Event

A pitch competition/event is a contest where entrepreneurs present their business concept to a panel of judges and investors in hopes of winning a cash prize or investment capital. All pitch competitions will have their own set of specific parameters.

Typically, you will be going up against other business owners with their own unique ideas and at the end, a panel of judges will pick the winner, who will then receive the prize. Even if you don’t place in a pitch competition, these events offer a great opportunity to introduce yourself to venture capitalists and angel investors. So be sure to make a lasting impression.

7. Apply to Accelerators or Incubators Programs 

Accelerators speed up the growth of existing businesses while incubators brainstorm ideas with the aim of structuring a business model and company around it. Where accelerators focus on growing a business, incubators focus on innovating businesses. 

These accelerator programs typically set out a timeframe of weeks or months to help develop businesses. The companies accepted to the programs will have demonstrated their viability for growth, with a minimum viable product (MVP). Accelerators will provide these businesses with a small seed investment and pair them with mentors from their network to help stimulate growth. 

Startup incubators will begin by identifying a small business or a single entrepreneur in the early stages of development. Certain incubators will focus on specific features and help businesses within a certain geographic location. For example, Monarq Incubator aims to support female-led startups. 

If a business or entrepreneur is chosen, they will spend their time networking at the incubator, communicating with other entrepreneurs and brainstorming ideas to determine product-market fit and create a viable business plan. 

Overall both accelerators and incubators nurture businesses in different ways.

Click here to find accelerators or incubators in Canada.

8. Send Out Samples of Your Product

When handing out samples make sure to give it to the right people. Look for people who would honestly be interested in your product, and be wary of handing out samples to potential competitors who could swipe your idea. 

A great place to start handing out free samples would be at your own personal event. This could be a networking opportunity to gather people for a night of fun, surrounding your business idea. 

This will especially work well for the investor you are trying to reach. They will get the chance to see how well people react to your product as well as getting the opportunity to try it for themselves.

9. Join a Mentorship Program

A mentor is there to guide, advise and educate you in areas where you may not have experience. However, before choosing a mentor, ask them if they have specific insight in the area you are looking to enhance. In this case, ask them if they have experience in finding small business investors. If not, maybe they know someone who does and  can connect you to the right people. 

10. Advertise

Business owners place advertisements for many things; to sell products and services to customers or to attract talent to their operation. Why not also use it to attract investors! Placing ads online or on social media platforms like LinkedIn, Facebook and Twitter, or even using more traditional marketing methods such as newspapers, can cast a wide net of potential investors. 

In order to secure small business investors, you will need to generate professional financial reports and provide key business insight that display unique growth opportunities. Use QuickBooks Online accounting software to secure your future today.

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