In our new ‘Raising Funding for Your Startup’ blog series, we’re taking you through six steps of raising funding. The third blog in the series is dedicated to finding investors. Learn how and where to find the right investors for your company and what to focus on.
What are you looking for in investors?
Before thinking about where to find investors you need to think about the following: What is your ideal investor? What is it exactly that you want? Is it someone who doesn’t ask a lot of questions and gives you the money straight away or do you prefer having someone who could be a potential ambassador, who will help you grow, open their network, etc.? Maybe you are looking for someone with a specific skill, maybe someone who worked in your industry, or someone who has led a larger organization, or someone who is an accountant or lawyer? Perhaps you would like all of those?
This is why it’s often good to have a group of investors. You can have a person that knows a lot about accounting, a person that knows a lot about your sector and a person that has worked for a similar company in the past. In your investor circle, you might even want to have a group of 5 to 15 people who offer different perspectives.
Let go of prejudice
Startups sometimes think of investors as demanding and grumpy people who want to invest in their startup only to get a good financial deal. But it is not like that usually. Often investors genuinely like to invest in startups and want to help them be successful. If you can show your investors that you are willing to give up a lot to make your startup a success, they will likely be eager to help you grow also.
For some investors, the perception the other way round can be more or less the same. In the beginning, they may think of startup founders as young and reckless, and be a bit hesitant in investing their money. They ask themselves if their money will be safe and if the startup is able to succeed. The startup founders might have a lot of knowledge, while the investor doesn’t, which could also be intimidating. A lot of times, startups use new technologies. If you have elder investors, who have not been raised with these technologies, things might be unfamiliar for them. And yet, it all comes down to the sense of connection between the investor and the startup. That is why there are often several meetings before an investor makes his/her decision.
Where to find investors?
Once you’ve decided what you’re looking for in investors, you can finally start thinking of where to find them. It’s never easy to find them, but what we often see is that investors who like startups, go to where startup hang out. Startups can be found in places such as accelerators, incubators and co-working spaces.
A startup will easily spend between 3 to 6 months in an accelerator under professional guidance. This professional guidance gives some assurance to the investors. Startups have to go through a selection process to get in. Some accelerators have hundreds of applicants while just a few of them get picked. So, investors often like hanging out at accelerators, because they are more likely to find good investments while spending less time there.
Business Angels often like to invest together with a group of three or four people. In such a group the investors usually know each other from the past (colleagues, ex-colleagues, owners of the same company in the past, golf club friends etc.). Once you have met and persuaded one member of such a group, you will be easily introduced to the others.
There are also places where you can go to pitch for investors, such as network events, pitch competitions, private banking meetings, etc. There are many events you can go to but it’s difficult to predict the success in raising money. Many times startups get on the stage during such an event and afterwards no investor talks to them. Ask your fellow startup founders if they have experience with such an event and if it is worth going. There are also events for which you have to pay as a startup in order to participate. We would not normally recommend any startup to do that, but again, check this with your fellow startup founders which had prior experience with such events.
There are a lot of things investors need to look out for when investing in startups. When you talk to an investor as a startup, make sure that you are approachable and clear. It’s all about personal connection. If an investor feels connected to a startup there is a higher chance investment will follow. Providing clear and complete information about how your company is going provides a solid basis. They will likely also want to get a sense for you as a person. Sometimes startup investors do not have any knowledge of the market the startup operates in, but if the faith in the founder is high they choose to invest.
Round Table Sessions
Leapfunder’s Round Table Sessions are an opportunity for founders to meet potential future investors in a casual, informal setting. Startup founders can ask investors anything they need guidance with and investors can find promising new startups. Thanks to the informal character of this type of meeting, people often open up more easily. We advise startups not to ask for money directly. As the saying goes: if you ask for money, you will only get advice … if you ask for advice you could potentially get money. Show that you can talk to an investor as a partner/mentor, instead of giving the impression you only want the investor’s money.
To learn more about raising funding for your startup stay tuned for more knowledge.