Many businessmen have made a fortune for themselves literally from scratch, subject to the following conditions: a good business idea, talent, and... outside investment.
Why is a private investor profitable?
Many young entrepreneurs are puzzled by how to find an investor for construction. And this is no coincidence: attracting private investment is much more profitable than obtaining bank loans. Firstly, construction requires a large amount of money, and the bank can simply refuse to lend. And recently, banks have generally been reluctant to issue loans for business projects. Secondly, the lending procedure is not so fast: you need to collect a lot of documents, find guarantors, wait for a decision to be made... Thirdly, a large loan amount implies considerable interest, which will definitely have to be paid.
For construction, it is best to find a private investor. The benefit is that the refund will be made from the profits from the project. As a rule, private investors invest money at their own risk if they assume that the project will pay off. And they are ready to provide for a clause in the investment agreement, according to which if there is no profit from the project, then there is no return on investment.
But precisely because the risk of investment futility (especially in construction) is high, it is quite problematic to find an investor for construction.
The first step is to consider your immediate environment as potential investors - these are relatives, friends and acquaintances. If you don’t find a suitable person among them, then there are also friends of friends, acquaintances of acquaintances, etc. Perhaps it is through personal connections that you can find an investor.
The advantage of this option is that you will know for certain (most likely) the financial condition of the investor. In addition, even if you were introduced to an investor by a not very close acquaintance, there will still be more trust than in a relationship with an investor “from the outside.” And of course, it’s easier to convince such people.
If it was not possible to find an investor for construction through the use of personal connections, then it’s time to use the possibilities of the Internet. Today there are many special sites where entrepreneurs look for investors. It must be remembered that investors themselves are always in search of good ideas. They have money that they are ready to increase. So why not do this? Therefore, you don’t need to think that there are only scammers on the Internet and you won’t find anything good. But your idea must be really good... We'll talk about this a little below.
Many cities often host various exhibitions, business seminars, and so on. There is an opportunity by attending such events to meet the right people.
Let's say you were able to interest one or even several investors in your project. But they can quickly lose interest in you if your idea is not fully developed upon closer examination. How to avoid this?
Your main goal is to convince a person (most often a stranger) that they need to invest money in your project. The attractiveness of a project is determined by many factors.
The first thing is the type of property and its location. You can find out which properties are attractive to investors on the Internet using various analytical resources about real estate. Of course, this needs to be done at a very early stage - the stage of the birth of the “construction” idea. You also need to find out if there are competitors, what their pros and cons are.
The investor will check your project inside and out before investing in it. Therefore, you must have a detailed business plan that outlines all the issues of interest to the investor. Let's briefly summarize what investors are usually most interested in:
- The essence of the project (data about the property that is planned to be built);
- Conclusions about the demand for a property, supported by objective data;
- Information about competitors and your advantages over them;
- Project cost;
- Ways to make a profit from a completed project;
- Payback period;
- What profit will the investor receive?
But the most important thing is to be able to prove that you are ready to stick to the business plan. That is, it is important for you to show yourself as a person who knows how to manage.
Often successful companies are created through the collaboration of several parties: one has an idea, the other has the resources to implement it. Thanks to the Internet, it has become easier for these parties to find each other. However, it is important not just to find a person with money, it is necessary to attract a good partner, cooperation with whom will become the basis for a successful startup and further advancement of the business. When considering investor proposals, try to think about which of them will be interested in your business. To do this, formulate the stage of development of your business: will it be its origin, formation, growth, maturity, or decline. Every company that is at various stages needs its own investor.
Features of the stages of company activity
At the inception stage, as a rule, an entrepreneur has nothing, only an idea, and sometimes a registered patent. There are also problems with the formation of the management team; business processes are not established. External investors are often relatives and friends, or they can be private individuals who have some experience in this area and are willing to take risks. On our website you can find such investor offers.
During its formation, the organization already has an established production of finished products, or already provides services, but its activities do not bring the desired income, and sometimes are even unprofitable. This stage is characterized by business processes that have not been fully developed; only the formation of a management team occurs. At this stage, it is necessary to pay attention to the financial and legal documentation of the company. An investor who is interested in it should easily understand the corporate structure of the organization and its financial position. It is good that the company does not participate in litigation, disputes with government services, etc. At the stage of expansion of activities, the volume of operations performed increases, and profits become stable. As a result, the company begins to occupy a stable position. The stage is characterized by well-established business processes, new markets and projects are opening. At these stages, banks, funds and other serious investors are involved in financing.
Advantages of our business portal
The business portal site is designed to assist its visitors in developing their business and increasing capital. In particular, this page presents various investor proposals. We recommend that you read them carefully and do not make hasty decisions. Try to learn as much as possible about your partner and assess his reliability. When drawing up contracts, read them carefully, let there be as few understatements as possible, and let all agreements be recorded in writing. On this page you can both find an investor and become one yourself by posting an investor proposal. Many of our visitors were able to find reliable business partners with whom they have been working for many years. Perhaps you will become one of their number.
Step-by-step instructions and pitfalls
We have already made detailed selections about where to go for a startup with a bare idea and where to get money for business in various niches, but this did not stop the flow of questions from newcomers. This time we have combined Rusbase training materials into a single logical chain to guide even beginners.
Where to start looking for investments? People who ask us this question are usually at the idea stage. To attract investment, they will have to go through a long and labor-intensive journey: thoroughly develop an idea, study competitors, assemble a team, create a working prototype of a product, make a competent presentation, register in online services to find an investor, upgrade to an accelerator, participate in competitions, make acquaintances at events, find potential investors and write them a lot of letters, read the specialized press and try to get on its pages.
Some points here are optional, some people do without them, but the general algorithm is as follows. Passing it in itself does not guarantee attracting investments - it all depends on you and your product. But without a presentation and understanding of the investment market, you definitely won’t see it.
What to do with the idea?
Work it out! Your brilliant idea is worthless until it starts attracting an audience and making money. Without a working prototype and a team, investors won’t even listen to you - unless, of course, you are already known in the market as a successful serial entrepreneur. By investing in an idea, an investor risks not only money, but also his reputation. To prove your ability to run a business, you need to independently find at least the minimum resources to create a product.
Often, startupers are afraid to tell experts about their brilliant idea, thinking that it will be stolen. In fact, an idea is worthless until it is implemented. This simple truth is reflected in the fifth paragraph of Article 1259 of the Civil Code of the Russian Federation: copyright does not apply to ideas, concepts, principles, methods, processes, systems, methods, solutions to technical, organizational or other problems, discoveries, facts, programming languages. You can secure intellectual rights only for technology, unique design and software. Learn more about your copyright protection options.
Moreover, the idea almost always turns out to be not new if you thoroughly study the market. Even if the product is unique, you can usually find substitute products, albeit with different properties. An investor will never believe that you have no competitors at all. He will think that you haven’t probed the waters well and that you shouldn’t be given money.
Before you approach venture capitalists, you need to understand the difference between a startup and a small business. In the public consciousness, the word “startup” often means the initial stage of business development. In fact, this is a special type of enterprise that implies product innovation, global ambitions and rapid growth. If you want to open a traditional business (for example, an atelier or a flower stall), then you will have different investors and a different strategy. Venture investors still prefer projects related to IT and innovation.
Where to look for a team?
To get even a fraction of an investor's attention, you need a working prototype and a team. It’s difficult to create a product alone, so you need to try to infect someone else with your idea.
Experienced entrepreneurs advise attracting like-minded people at startup events. Especially at hackathons, where you can see a person in action. You can search for competent co-founders using special services - for example, on the website CoFoundIt.ru, which recently launched IIDF (the base is formed from accelerator graduates). You can also always make inquiries from friends or call out on social networks, but in this case there is less chance of snagging an experienced specialist.
More information about team formation can be found here:
If you already have an MVP
A working prototype is not like a landing page with empty forms. At the investment search stage, it should already be tested by potential clients. You also need to come up with and be able to clearly explain a business model - how you will earn money per unit of product.
If theoretical knowledge did not help you understand the idea, MVP and monetization strategy, you can turn to product development specialists. For example, this is done by the company Create, whose services will cost you from 150 thousand to 1 million rubles, depending on the amount of work.
Well, if you have a working prototype, you can start looking for an investor. To do this, you will need a thoughtful, compelling presentation that will become the basis for your pitch.
But before you dive into the intricacies of creating perfect slides, you should think hard: do you really need an investor? It is important to understand that investment is not a panacea. Business is not built on them, but on customers and sales. If this is not the case, then no investor will help you. It is best to attract investments to increase sales, because the essence of a startup is rapid growth. If you develop well, investors will come to you themselves, you’ll see.
So sometimes you just don't need an investor. Some startupers generally manage to develop a company only with their own money - this is called bootstrapping, which translates from English as belt-tightening. And this approach has a lot of advantages - for example, complete freedom of decision-making and serious development of entrepreneurial skills.
In addition, there are hundreds of free or cheap services on the Internet that will save you money, effort and time when solving various business problems.
How to make a presentation for a startup?
Investors are doomed to watch hundreds of presentations a year - respect their time. The presentation should be concise and well-structured, that is, contain visual information about the team, product, market, audience, business model and capitalization.
Read about the rules for creating a successful presentation here:
If you still can't combine these tips and our free templates into a high-quality presentation, you can.
But beautiful and clear slides alone are not enough for investors - they want to hear about money and their profits. To prepare for tricky questions in advance, first read these materials:
Search for investments through startup databases
When you already have a product and clear outlines of the project (which are outlined in the presentation), you can register with online investment search services. Investors are looking for projects there in the niches they need. Posting in startup databases is usually free, but projects undergo moderation, the severity of which depends on the resource’s policy.
- Rusbase Pipeline adds startups only if there is a working prototype and signs of demand (we currently have about 350 projects in our database), investors - only if they are ready to invest at least $50 thousand in one project (their list exceeds 200 names).
- StartTrack is a crowdinvesting platform from IIDF that helps investors enter into joint deals. A startup needs to pay a commission to attract investments. There are currently 725 investors and 37 projects in the StartTrack database. This ratio hints that the site’s requirements for startups are quite high.
- Spark is a service for finding an investor who has retrained as a technology project crowd (similar to Habr), where you can share experiences and post vacancies. There are 4249 projects in the database, 1329 of which are seeking investment.
- Napartner is one of the first startup exchanges on the Russian market. As indicated on the website, there are 1,139 registered investors, 9,892 “innovators” and 456 projects seeking investment. There is also a section for selling ready-made businesses and a vacancies section.
- Askcap is perhaps the largest Russian startup database. According to the project’s own information, the site contains profiles of 5,410 projects, most of which are available only to authorized users. 163 partners work with Askcap - venture funds, incubators, accelerators and technology parks.
- AngelList is the world's leading service for finding startups and investments, which has spawned many clones (ours are listed above). Its database includes 1,589 startups and 378 investors from Russia. AngelList provides opportunities for co-investment in projects, posting vacancies and resumes.
Participation in competitions and other events
Competitions help to gain valuable competitive experience, and if you win, a grant and the attention of investors (including through reporting publications in the media). In Russia and abroad, competitions, hackathons and free educational programs for startupers are regularly organized - it is convenient to follow this flow of opportunities with our tag.
It can also be helpful to go to industry events, especially if you're new to the venture scene. There you can listen to successful technology entrepreneurs, meet potential investors, catch the main trends, talk about your project and get feedback. Of course, moderation is needed in everything - connections and parties alone cannot promote a project. We collect the main events of the startup industry in the “Entrepreneur Calendar” section.
Active search for an investor
If you haven’t found an investor at events, you can try writing to venture funds. Try it - because cold and warm contacts do not work well in such matters, the most effective means has always been and will be personal acquaintance.
Before writing a letter to an investor, it is critical to make sure that your project matches their preferences. Funds usually indicate on their websites what niches and stages of startups they are interested in. If not, then you can still guess about it from the list of portfolio companies (which should be studied in any case). To compile a list of funds to which you can send your project for consideration, you can use our database of investors - there are convenient filters by niche and stage.
What to write to an investor? Before you sit down to write, you need to carefully study the foundation’s website. Fan mailings to investors never worked. Also, under no circumstances should you write from someone else’s mailbox. In order not to be left without an answer, you need to accurately formulate the subject of the letter, adequately introduce yourself and the project (and yes, ask a literate friend to proofread the text for errors) and explain why your startup is relevant to the fund (for example, it is similar to or complements one of the portfolio projects). If the letter consists only of a link to the attached presentation, it simply will not be opened.
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Starting a business in many cases requires attracting significant investments. Appropriate capital can play a decisive role in the timely introduction of a startup to a promising market, improving its recognition in the segment, expanding its geography, and modernizing production. Where can you really find an investor? How to build a trusting relationship with him?
For what purpose are they looking for an investor?
Before asking the question of where to find investors, you need to decide for what purpose the search for partners should be carried out. As a rule, this problem is solved by the owner of a commercial enterprise. He requires the assistance of the investor due to the presence of insufficient funds at his personal disposal in order to fully implement the business project. An investor may also be interested in providing the required amount of financing in order to subsequently benefit from the growth of the company’s turnover.
What are the mechanisms for building relationships with investors?
Also, before thinking about where to find investors, an entrepreneur needs to decide on the desired mechanisms for building relationships with a partner. There may be several of these.
First, the relationship between an entrepreneur and a partner who is willing to provide financing may constitute a direct investment. This mechanism involves providing the company with funds in exchange for the partner’s participation in the direct management of the organization and in determining the business development strategy.
Secondly, financing can be raised on portfolio investment terms. This mechanism assumes that a partner, by investing money in business development, simultaneously acquires a share in the ownership of the company. In the first case, the investor's benefit is to participate in the management of a potentially large enterprise and become an influential member of the business community. In the second, the partner, if the company grows, gets the opportunity to significantly increase his capital.
What types of investors are there?
Another nuance that an entrepreneur needs to study before deciding where to find investors is to consider the specifics of the activities of partners who are ready to invest in other businesses. Subjects that become participants in the relevant legal relations can be represented by: individuals, organizations. Both of them, in turn, are classified into venture investors and those who are ready to invest in fundamental projects. Investors can also be Russian and foreign.
Another criterion for classifying entities involved in legal relations with businesses on financing issues is the degree of state participation. There are government agencies, most often foundations, that assist businesses in raising funds or provide them. There are completely private companies.
Crowdfunding
There is a special category of legal relations in the field of investment - crowdfunding. This term corresponds to the mechanism of business means by a large number of people - individual social groups or representing society as a whole. As a rule, investors who provide funds to entrepreneurs through crowdfunding do not impose any obligations on them in terms of exchange for a share in the business or participation in the management of the company. This feature predetermines the great popularity of the corresponding legal relations. Many entrepreneurs, when thinking about where to find investors, first of all turn to crowdfunding.
What might interest an investor?
Let us now consider a number of practical nuances that characterize the relationship between entrepreneurs and partners in terms of business financing. So, before thinking about where to find an investor for a project, you should pay attention to such an aspect as the attractiveness of the business project - those indicators that a potential partner will pay attention to when deciding to invest money in the company. Which ones exactly?
First of all, this is the presence of a sufficiently large market for the sale of goods and services that the company produces. The second indicator is the dynamics of industry development. The investor is interested in ensuring that the product produced by the company is in demand on the market for a long time. If the dynamics of the development of the industry in which the enterprise operates is quite high, then the partner must make sure that the entrepreneur can ensure the timely release of goods that are not inferior to the products of competing enterprises.
Actually, the level of competition is also an important indicator for an investor. At the same time, high may be more preferable for some partners, while low for others. In the first case, the investor and entrepreneur can take advantage of the presence of a fairly stable demand for the product being produced and counteract competitors due to the higher quality or lower price of the products supplied to the market. Low competition is attractive from the point of view of the company's profitability. Of course, provided that there is demand for the goods produced by the company.
Another important criterion for an investor to make a positive decision regarding project financing is the validity of the business plan. The market may have the most favorable conditions, optimal levels of demand and competition, but if the entrepreneur does not provide a plan in accordance with which the company will take advantage of these advantages, the investor may question the prospects for financing the company.
The next factor in a partner making a positive decision on a project is the competence of the team with which the business owner works. Or his personal one. The market situation may be optimal, the business plan may be worked out in detail, but the implementation will not be at the highest level due to the fact that it will be carried out by untrained people.
These are the main factors that an entrepreneur should consider before thinking about where to find an investor for a project. If he successfully solved this problem, you can move on to considering specific mechanisms for finding a partner. Where to find an investor for a startup of a medium or large enterprise in Russia?
How to find an investor for a startup?
Let's start with the specifics of finding partners for a startup founder. The main value of the corresponding type of business is a promising idea. As a rule, it is characterized by originality and dissimilarity with most other concepts. Another significant criterion for assessing the prospects of a startup is the absence of existing businesses in the corresponding segment throughout the country or a particular region.
It happens that an entrepreneur who is solving the problem of where to find an investor in Moscow nevertheless decides to switch to one of the markets in the constituent entities of the Russian Federation, since competitors may already be operating in the Russian capital. While in the regions similar businesses will not be very developed or will be completely absent as economic entities.
Above we examined the main mechanisms for attracting investment. If the question is about where to find an investor for a startup, then the optimal schemes in this case would be: attracting crowdfunding. The advantage of both mechanisms is the absence of large risks for the entrepreneur. True, in the case of venture projects, the business owner in most cases has to give up a share in the ownership of the company - the type of financing in question falls under the category of portfolio investments. However, in this case, the partner, as a rule, bears the bulk of the expenses necessary for the The advantages of crowdfunding are also obvious - this is the opportunity to attract a large amount of funds in the absence of obligations to investors in most cases.
Where can you find an investor who is ready to invest in a startup within the framework of one scheme or another?
If we talk about venture projects, there are a large number of specialized funds that are actively involved in the relevant legal relations. They exist both in the Russian Federation and abroad, and are represented by both public and private structures. Sometimes it is enough just to find a suitable venture project or venture fund, and then get acquainted with the proposals of the relevant companies regarding the prospects of partnership with private organizations.
How to find investors and where to look for them when it comes to crowdfunding? This format of legal relations is almost entirely online. There are a number of the largest ones - both Russian and foreign. Using them is quite simple, but it is important to create a competent description of the business project and tell potential investors about its advantages.
How to look for an investor for a small business?
Let's now consider where to find an investor for a small business. This format of the enterprise’s activity assumes that the company is not a startup, but an already functioning business with more or less acceptable turnover. Investments in this case are sought in order to expand or modernize production, conduct a large-scale marketing campaign in order to increase brand awareness in the region, country or abroad. As a rule, small businesses are financed with the participation of investors who specialize in building fundamental partnerships with private firms.
Venture investments allow for a scenario in which the partner, in principle, will not be able to return his own investments, since the business will be unprofitable. In turn, a fundamental partnership assumes that the investor will be able to at least ensure a zero return on his investments, and in the future, significantly increase capital through the growth of the enterprise.
Where to find an investor for a small business? Such problems, as a rule, are solved during personal meetings between entrepreneurs and potential partners who are ready to invest money in the development of the company. They can be held as part of specialized events - business conferences, round tables, presentations. It is possible for an entrepreneur and an investor to communicate in an informal setting, for example at a corporate party to which they were invited. Fundamental investing is a common type of activity among financial funds. Information about them can also be found in search engines.
How to find an investor for a medium or large enterprise?
Where can I find an investor for a business that is a medium or large enterprise? It is noteworthy that a large-scale established company, at least classified as a medium-sized business, as a rule, in itself is a desirable investment object for an experienced financier, since it is an operating profitable business. Therefore, it is possible that you may not have to look for a partner willing to invest money in the company if it meets the criteria of a large enterprise.
However, another question may well be relevant - where to find a private investor who would be a reliable partner, ready to build a constructive dialogue on business development issues. It is resolved, as a rule, in non-public ways - through communication with major financiers within private channels. But in some cases, it is possible to find an investor at large events, especially if we are talking, for example, about international exhibitions. The prospects for building relationships with partners largely depend on the area of business.
Thus, solving the question “where to find an investor for construction” may differ significantly from such a task as finding a partner in the field of information technology. The construction business and IT are areas with different profitability and development dynamics. Each of them requires special investor competencies when assessing the prospects for investing in a particular company. But, of course, there are financiers who are equally well versed in both construction and information technology. Thus, the investment search strategy largely depends on the size of the company, as well as on the sector of the economy in which the company is represented. For startups, one approach will be more justified, and for small businesses, medium-sized and large firms, other strategies.
It will also be useful to consider a number of recommendations for entrepreneurs who decide to find an investor and establish a trusting relationship with him. Let's study those strategies that can be characterized as universal, sufficiently suitable for a business of any size - startup, small, medium or large enterprise.
How to find an investor and establish a relationship with him: recommendations
Actually, it is useful to search for an investor in those social environments in which people engaged in activities close to the company’s profile communicate. Where finding a private investor for construction is not a problem, it can be quite difficult to establish interaction with a person who might be interested in the sales field. Effective investing is largely the result of high competence, most often achieved within the narrow specialization of the financier.
Investment experts advise company owners to first tell potential partners what other sources of financing are expected to be used and what their actual availability is. This approach will allow the investor to understand his own role in relations with the business and assess his readiness to comply with it. So, if the company also uses credit funds, then its owner can make it clear to the partner that he can count on a smaller share in the business than if the investor financed the project individually.
Another important nuance is the discussion of the conditions for changing the initially reached agreements. It may turn out that during the course of development the project will begin to show greater or less profitability (or dynamics of return on investment) than expected by the business owner or investor, as a result of which it may be preferable for them to change the order of their own participation in the company’s activities.
An entrepreneur should discuss with his partner the reporting procedure for certain business transactions and its composition. Some investors require the preparation of only accounting documentation of the appropriate type, while others prefer to also receive these nuances. It is useful to clarify these nuances at the very early stages of the partnership.
It is therefore important not only where to find a business investor, but also how to establish a long-term partnership with him. A high level of competence in entrepreneurship is always valued. Therefore, investors will also be interested in building an effective partnership. You need to be able to listen to him and take into account the interests he expresses.
Summary
So, we looked at the question of where to find a real private investor. Its successful resolution depends on the scope of the company’s activities, its scale, the level of competence of the entrepreneur and the specialists he attracts. An important role is played by other conditions of financing of the company, as well as the willingness of its owner, if necessary, to revise the agreements reached with the investor in order to build long-term partnerships.