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December 25, 2019

3 Steps for Securing Investors for a Startup

With thousands of startups launching every day, becoming an entrepreneur may seem like a lucrative career choice. However, it is important to note that it takes much more than a great business idea to start a successful company. An enormous amount of hard work, passion, and dedication go into creating a sustainable business. Having access to proper funding is also a critical aspect of success.
The business industry is so competitive that it is impossible to get a company off the ground without the backing of the right investors. It is not enough to just pitch your idea and accept funding from the first person who offers it. Following the three steps below can help you secure the funding you need to build your business.

Identify Which Type of Investor You Need

The type of investor you need varies depending upon which stage your business is in. Seed money is vastly different from growth funding, so you need an investor who is willing to provide funds for the current stage of your company. You can find investors for any of the following stages.
·         Seed stage: Your business is still mostly an idea. The money you receive from seed investors with be used to build and market prototypes. The money is intended to get the company off the ground so it can offer a substantial return for investors.
·         Venture capitalist stage: Your company has proven to have a successful concept through sales but needs additional funding to grow. A venture capitalist typically has numerous connections to help you market your product or services. The money you receive can be used to advertise the company and increase sales.
·         Growth stage: Your business has proven itself to be wildly successful and many people want to profit from it. The company’s profits are stable enough to sustain it but investors make it possible for the business to grow and expand.

Many investors specialize in one stage so it is important to know the current needs of your business. This allows you to find investors with experience and knowledge of the current stage so they can offer your company their expertise as well as their money. Whether you choose to secure the funding you need from a bank, angel investor, or personal investor, you have to know why you need the money and how you will use it to grow the company. This will help you develop a good business pitch.

Do Your Research On Potential Investors

Once you know which type of investor you need to work with, you should start researching the candidates. Different investors offer various types of experience and connections so it is crucial to choose someone who specializes in your industry. If your company is in the tech industry, you need someone who is interested in funding new technological solutions. If your company offers an innovative product that makes life more convenient for consumers, you need a financial backer who believes in the product.
For example, Chris Sacca is a legendary Silicon Valley investor who has provided early financial backing for companies such as Uber and Twitter. He has also made substantial investments in the technology industry with the cloud hosting software company Twilio. His company, Lowercase Capital, is responsible for backing numerous startups with the tech, social media, and rideshare industries. This makes him a wonderful candidate for other companies within the same industries. Sacca’s previous experience has provided him with numerous business connections that are beneficial to startups.

Entice a Lead Investor

Once you have determined which investors will be most beneficial for your business, you can start making your business pitch to see if any of the candidates are interested. Many investors will pass, especially if your company is still in the seed stage. However, once you have a lead investor, someone willing to provide you with at least 15% of the funding you need, other investors will likely jump on board.
For this reason, it is important to secure a lead investor first. Targeting high-profile individuals such as Sacca is the best way to do this. Because these investors have so much business experience, you will have to impress them with an excellent pitch that pinpoints why each investor is the right financial backer for the company. If your pitch is solid and your business plan is well thought out, the lead investor you are pursuing will hopefully agree to provide the funding you need.
Securing the investors you need to launch a business may seem like a daunting challenge, but it is the best way to set your company up for success. Do the proper research to identify your company’s investment needs. This allows you to target individuals who are interested in your industry and have the expertise and connections to help you grow your business. After securing a lead investor, it is likely that you will gain all of the financial connections your company needs to thrive.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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