How to find investors for a startup

Business is characterized by financial investments that are not always planned. When there id not enough funds to finance the project; you can get a bank loan or
attract an investor. The second option is more preferable, since the partner can provide not only money, but also consulting services. The only downside for
startups and small businesses find it difficult to establish cooperation, since tare characterized by increased risks of default and non-repayment of funds. Let's figure out in practice where you can find an investor and how to position your activities to guarantee obtain financial resources. We will tell you where you can find an investor and how to position your activities so that guaranteed to receive financial resources

What are investments?
Investment is understood as investing funds in a new or existing project to obtain
material or intangible benefits. An individual can act as an investor or a legal entity.

In practice, the following classification of investments is relevant:

* Debt financing. It is analogous to a bank loan. The investor gives
money on a repayable basis. The contract sets a deadline for the return of funds. Profit
consists of interest for the use of borrowed resources. Businessmen to this option
resort when a loan is refused or there is a need to provide solid collateral.
Subject to contractual obligations, the partner cannot claim a share in the business or
other assets.

* Equity financing. The main purpose of investing funds by an investor is to obtain a share in
business. In this case, there is no need to return the money, it is used for development
economic activity. The investor becomes a full-fledged owner and can
make management decisions.

* With remuneration other than cash. This approach is practiced by crowdfunding
platforms organized for collective fundraising. For their participation, users can
receive various gifts and services, for example: free access to the fitness center at
a certain period of time after its opening.

* Government grants and subsidies. Provided to small businesses within
priority sectors and areas of activity. The money is targeted. At
confirmation of expenses does not need to be returned.

According to the period of provision, investments are divided into short-term and long-term.

According to the form of ownership, investments are divided into:

* private (money of individuals);

* government (subsidies and grants);

* foreign (from legal entities and foreign banks);

* joint.
Investor classification
Depending on the chosen strategy, investors can be divided into passive and active. IN
In the first case, the emphasis is on reliability at the expense of profitability, so such investors do not
consider high-risk projects. For active partners they are valuable
speculative projects that provide high returns, but also increased risks.

This classification sometimes takes the following form:

*aggressors (participants with an active investment strategy);

* conservatives (investors with a passive strategy);

* “middle peasants” (combine an investment portfolio to achieve a balance between risk and
profitability).

Based on qualifications, all investors are divided into qualified, having
relevant licenses and permits, and unqualified (regular
market participants with savings).

Which business is more willing to invest money?
To receive funding, the following conditions must be met:

* period of activity: from 12 months;

* presence of a well-thought-out development strategy;

* positive financial results;

* prospects for increasing the market niche.

As for startups, they are more often financed by venture funds, which have recently
are characterized by low activity. At the same time, new projects will grow without additional investments are impossible: all operating profits are used to support the business
processes.

Investing in startups is characterized by high selectivity. Investors are more serious
approach the selection of projects (in most cases they can count on financial resources
projects in their final stages).

What criteria do investors pay attention to?
Various factors are taken into account when making an investment decision
Investing is a risky undertaking, so when deciding to
investing takes into account various factors other than risks. To the common ones you can
attributed:

* provision of guarantees (formal conclusion of an agreement indicating rights and obligations
parties, terms of return of funds, amount of remuneration and security);

* the right to participate in business management (applies only to equity financing);

* economic justification for investment in this particular project (its strengths,
payback period, attractiveness of the business idea);

honesty of a businessman (availability of reliable swot analysis with strengths and weaknesses
project).

Do you need a business plan?
To attract a potential investor, three components will be required: an idea, calculations and their
“packaging”, that is, a business plan with handouts. No investor will
transfer money to a project that is not even on paper.

A business idea must be unique and promising. It should have no analogues on the market,
otherwise it will be difficult to classify it as a startup. The idea must be accumulated
competitive advantages of the project, allowing you to choose it from hundreds of other options.

The basis of any business plan is calculations. It is important to calculate exactly how much you will need
capital investments for the development of the project, and on what areas the money will be spent.

In practice, it is necessary to develop three business plans:

* Optimistic. Assumes that the project will develop at a given pace without
additional unaccounted risks, so the business will make a profit within the established time frame.

* Realistic or conservative. Reflects the likely outcome of the project development and volumes
production and sales, profitability. There are usually a lot of assumptions in a given business plan.

* Pessimistic. The document takes into account the maximum number of possible risks.

A business plan gives a detailed idea of the project and allows you to answer the question: “Is it worth
should an investor invest money in it? Due to the variability of the business environment, the document requires
constant updates and adjustments.

You can develop a business plan yourself or entrust it to specialized
organizations. The choice of method depends on the ability to correctly find the “highlight” of the project and its
strengths, as well as present them to potential investors.

Will a project presentation be required?
The business plan presentation is a short story about the future direction
activities with graphs and illustrations
Typically, a business plan includes up to 50-70 sheets with text, drawings, diagrams and calculations.
This format is not always convenient for visual perception, so additional
it is necessary to prepare a presentation and handouts.

The business plan presentation is a short story about the future direction
activities with graphs and illustrations. The main goal: to prove that the project is
real and profitable from the point of view of investment instruments.

The structure of the presentation includes the following sections:

* title page;

* company information;

* description of a new direction of activity (production of goods, provision of services);

* information about the target audience;

* information about competitors (usually displayed in the form of a table indicating the name,
pricing policy, location, strengths);

* employees (planned staff and qualification requirements);

* marketing and promotion;

* financial plan (one-time and regular financial expenses);

* conditions for return on investment.

What risks does a business take when attracting investments?
Investments are rarely provided free of charge, with the exception of government
support measures for promising projects. Usually for the use of borrowed funds,
interest must be paid at regular intervals or at maturity. In that case, the main risks are associated with miscalculations in the business plan, the inability to reach
payback within a specified period and, accordingly, pay off the principal and interest.
Investors assume this outcome, so they often require collateral in the form of a car,
real estate and other assets. With a pessimistic development of the forecast, it is possible to not only
burn yourself out, but also lose property.

When attracting capital investments for a share in a business, over time you can lose
full management. The new owner has the right to dictate his terms and participate in
adjusting the company's development strategy. In practice, there are also fraudulent
schemes when several investors invest money in a project and receive shares, and then
resell them to a specific person. In this case, the likelihood of his sole
managing the business and receiving most of the dividends after reaching the point
breakeven.

In general, all risks can be divided into 2 categories:

* Systemic (market, currency, inflation, political). Predicting them is
quite difficult, even when using authoritarian macroeconomic forecasts
development.

* Non-systemic (operational, credit, business). This group of risks can be calculated using
using mathematical and statistical models.

Where to look for investors?
There are a large number of channels for attracting investors
Applying to banks for borrowed funds is inappropriate, since they do not lend
startups. This option is possible if the applicant has an already established direction
business that generates income. In this case, you can apply for a loan for any purpose and send
money for a new project.

There are a large number of channels for attracting investors for startups. Let's consider
the most popular of them.

Business angels, funds, associations
These are business communities and private ones, centers who are ready to provide financial and consulting
startup support. Among the famous projects we can note “Angel Leaf” - a special
community for aspiring entrepreneurs, within which you can get a full-fledged
support at any stage. The following options are presented here:

* catalog of projects and investors;

* recommendations for finding financing;

* presentation of ideas in a compressed format.

The National Community of Business Angels also helps to find financing, but
business compliance with the following requirements:

* age: no more than 3 years;

* total revenue for the last 12 months: no more than $1,000,000;

* project goal: creation and promotion of innovative products.

The maximum investment amount is $2,500,000. To obtain them you will need
business plan.

Business accelerators
This option involves launching a project under the auspices of a large company,
providing various support options:

* financing;

* provision of production facilities and laboratories for business testing and
assessment of prospects;

* making improvements to the development strategy;

* consultation and mentoring;

* transfer of resources and premises for the project;

* team training.

The effectiveness of business accelerators is due to the creation of conditions for testing ideas and
identifying unaccounted risks. According to statistics, every third project fails precisely because
lack of this stage, as well as lack of experience among employees. Average support from a large company
takes up to 6 months, then the startup will have to operate independently.

To find a company that is ready to take control of the project, you can use
services of popular accelerators:

* 500 Startups;

* Philtech accelerator;

*GenerationS;

* Fintech Lab;

* Global Growth Challenge, etc.

Business incubators
These institutes provide comprehensive support to startups: from developing a business idea to
entering the market with new products and services. They are interested in supporting innovative
projects in construction, energy, logistics, services, etc.

Business incubators provide the following assistance options:

* premises for conducting business or for an office;

* consulting services at any stage;

* marketing and promotion;

* accounting and legal support;

* search for investments;

* presentation of the project at the regional or federal level.

State incubators provide assistance free of charge, but in most cases
cases it is truncated. Private institutions provide full support
startup.
Crowdfunding and private arrangements
Crowdfunding platforms are used to quickly raise start-up capital. Enough
publish a description of the project on the website, indicate a fixed fee amount and period (usually 1 -2
month).

At such sites, non-standard, creative projects are endowed with special value.

Venture funds
Unlike other investor search channels, here you can find a partner only for
financing an innovative project. The level of risk does not matter. In accordance with
With Startup Genome research, only one out of 10 projects becomes profitable, but it
covers all losses for 9 closed initiatives.
Conclusion
So, a startup has every chance of finding an investor if it has a reliable business plan and
unique idea. The calculation of the payback period, one-time
and regular expenses, as well as identifying systemic and non-systemic risks.

To find an investor, you can use various channels: from business incubators and
accelerators to crowdfunding platforms and personal agreements, specialized
forums and other platforms.

Top 7 ways to find prospective investors for your small business:
1. Family or Friends
2. Small Business Loan
3. Small Business Grants
4. Angel Investors
5. Venture Capital
6. Connections in Your Field of Work
7. Crowdfunding Platforms