It is difficult for a novice entrepreneur to organize his own business, since starting even a small business requires significant financial investments. Where can I get this money? The fastest and most reasonable way is to attract an investor - a person who will contribute his capital in exchange for part of the profit or shares. An investor can become a partner of a company, and often an assistant in development, because he is no less interested in the business generating income than the owner.
Where can a businessman get money to develop his business?
Until the business begins to generate income, not a single day will pass - all this time the entrepreneur spends funds on rent, paperwork, payment of wages, purchase of equipment, consumables, products and for other purposes. You can get start-up capital from several sources:
- Personal savings is a long, but most reliable way, in which you need to set aside a portion of your income every month;
- Bank loan – they are reluctant to provide money to start a business, requiring collateral, so more often entrepreneurs take out consumer loans, but the amount is limited;
- Borrowing money from relatives is a good method if you have a wealthy loved one who is ready to borrow a large amount;
- Search for an investor - an individual, a company, an association of people, it can also be business angels - specialists in investing in start-up entrepreneurs;
- Finding a partner - in this case, the business will have to be divided in proportion to the amount of investment; it is better to look for a financially literate person, not a beginner;
- Starting a related business - for example, if you want to open a car service service, you can start with tire fitting, and when you have profit and experience, expand your business;
- Receiving a subsidy from the state - provided by the employment center, district administration, business support department, but the amount of injection is small, reporting is required;
- Crowdfunding is the collection of funds through a special platform from ordinary people, but for this you need to propose an unusual business idea, interest the audience, and conduct an advertising campaign.
Experts and experienced businessmen are sure: borrowing money or resorting to credit is not the best idea for an entrepreneur. It is better to use your savings or attract investors by concluding a cooperation agreement with them.
Step-by-step instructions on how to attract an investor?
Beginner entrepreneurs don’t understand how to find an investor for a small business from scratch? To attract capital to develop your business, you need to draw up a well-thought-out business plan, choose a convenient form of cooperation, find professionals, negotiate and conclude a cooperation agreement.
How to prepare a business project?
A business plan is the business card of an entrepreneur; it is this project that potential investors will study when assessing the attractiveness of financial investments. Please note that the investor is not interested in how original the idea is, what prospects it promises for you personally, he wants to know what profit he can get. The business project must contain:
- a brief and detailed description of the idea and the plan for its implementation;
- calculation of starting capital;
- analysis of real benefits for the investor - also with calculations and reasonable conclusions;
- the payback period during which the income will be received;
- investment prospects.
If a business plan is drawn up by a beginner, he may make typical mistakes due to inexperience, which will scare off investors; sometimes it is better to invite specialists to prepare documents or ask for help from businessmen you know.
How to choose the appropriate form of cooperation?
The form of cooperation is chosen by the businessman together with the investor, but first it is worth calculating the benefits of each model and determining the most effective way of interaction. An investor can earn income in several ways:
- percentage of the deposited amount, as with lending;
- part of the profit from the implementation of the idea;
- share in the business – re-registration of ownership rights will be required;
- finished products or services - relevant for investors involved in a related industry, for example, if a businessman opens a company for the delivery of motor oils, and the investor has his own auto parts store.
During the negotiations, the investor may insist on a different scheme of cooperation; it is often more profitable for the entrepreneur to make concessions than to lose the opportunity to receive funds.
How to turn to experienced businessmen for help?
It is difficult to independently develop your business and look for investors without experience. It is better to ask for help from other businessmen who will provide assistance if cooperation is possible between you on favorable terms in the future. Who to contact? For example:
- if you produce food products, contact store owners;
- if you plan to carry out transportation - to businessmen who rent out cars or need regular cargo delivery;
- if you want to open a flower kiosk, go to flower suppliers;
- you are going to sell farm products to the owners of private household plots.
Experienced businessmen will advise you on the pitfalls and features of the chosen industry, help you study this issue more closely and prepare a detailed business project.
How to negotiate?
The first meeting with an investor is always a presentation of the project, presentation of the business plan and coverage of the main issues that may arise. You need to carefully prepare for the meeting so that the investor understands several points:
- you have financial literacy;
- have excellent command of the topic;
- offer a fresh and interesting idea;
- the investor will be able to make a profitable investment;
- there is no doubt about the honesty of the businessman and the reality of the project;
- what risks exist in this industry.
During negotiations, the emphasis should be placed not on how new the business will be, but on outlining the benefits of investing.
How to conclude a cooperation agreement with an investor?
When an investor is found, the project is presented, consent is obtained, all that remains is to prepare an agreement on the investment of capital. In this matter, it is better to involve a lawyer and check that the document contains the following:
- terms of investment;
- payment method;
- the amount the investor contributes;
- rights and obligations of the parties;
- procedure for action in case of violations.
The money received from the investor must be used only for business development - this is directly stated in the contract.
How to interest investors in a business plan?
- collect information about the investor, eliminating possible misunderstandings;
- carefully calculate the amount of investment that is needed;
- do not delay the implementation of the project;
- outline specific goals;
- analyze the market, competitors, and the situation in the industry so that the investor understands that you have worked on this topic well;
- do not hide important information and facts from the investor.
Of course, a businessman wants to present his project in the most favorable light, so data is often embellished and calculations turn out to be overly optimistic. An experienced investor will definitely ask about the fate of the project in the event of negative developments; you need to be prepared for this question.
Finding an investor is not so easy, because the number of business projects created every day is only growing, and the level of competition for raised funds is increasing. To find an investor, you need to approach your search wisely, following these tips:
- Start your search as early as possible, as this process can take several months. You need to look for an investor after you have calculated the prospects of the business and assessed the benefits of implementing the idea. The main mistake of newcomers: they use their funds for development, and when the capital runs out, business goes into decline, they begin to look for injections from outside, but such a project most often turns out to be uninteresting for investors;
- Contact someone who can really help. If the investor is large, it is not worth going to him, offering to invest in a small business, but if it is a small company, then it simply will not have enough capital to invest;
- Name the specific amount that is needed - there is no need to indicate a range, for example, from 500 to 900 thousand rubles, the number should be accurate, and the spread should be minimal.
An experienced investor knows that it is better to invest in projects with balanced income and risk. The goals of an entrepreneur must be specific, and the idea itself must be relevant, allowing for profit in the future.
How to find an investor - review of specialized sites
In the era of Internet development, it is impossible to imagine searching for investors without the use of remote technologies. For this purpose, there are special platforms where businessmen can “meet” and come to an agreement with potential investors. The following platforms are popular in Russia:
- Boomstarter is a crowdfunding platform focused on raising finance for the implementation of creative projects;
- Planeta.ru – allows you to find an investor and implement socially significant, creative ideas; about 800 thousand people are registered on the portal;
- Nachinanie.ru is a platform for collective financing of projects - religious, educational, socially significant;
- Eastwestgroup – here the investor search services are paid, but the assessment of a business project is carried out free of charge, the company has been professionally attracting investments for over 10 years;
- Start2Up is a message board for investors and aspiring entrepreneurs; projects in the fields of the Internet, education, art, and culture are popular.
Finding an investor to develop your business is not an easy task, but it is a feasible task with the right approach. The main thing is to propose a relevant idea, draw up a well-thought-out business plan, and accurately calculate the benefits of investments. A potential investor will be interested in an honest project with low risks, a sufficient amount of income during the implementation process, and also with a financially literate owner.
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.
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Successfully finding an investor for a business is a life-determining task for most start-up companies. Implementing it in modern conditions is much easier than a few years ago, thanks to the Internet and remote investment platforms. But in any case, an entrepreneur looking for funds for his own project should know several important rules and recommendations that will help solve this problem more successfully - we talk about them below.
Who are “investors” and why do businesses need them?
Before you start looking for investors to implement your idea, you need to understand what this concept means and how it differs, for example, from a sponsor or philanthropist. These terms are often confused with each other, although in reality they refer to very different ways of directing funds.
The goal of any investor is to increase their own investments. Investors invest money only in projects that, after a certain period, will increase their capital or begin to generate regular profits in the form of dividends.
Investments are not charity. Unlike sponsors or philanthropists, investors give money to companies not with the goal of helping, but with the prospect of making money on it. Investments are needed for business development and ultimately benefit both parties: the entrepreneur gets the opportunity to realize his business idea, and the investor increases capital.
Unlike sponsors or philanthropists, investors give money to companies not with the goal of helping, but with the prospect of making money on it.
Who most often acts as investors?
In a situation where you need an investor to start a business from scratch, it is important to know who can play this role. Most often this is:
- Banks. Financial institutions prefer to deal with existing, stable and promising companies, so for beginners, going to a bank is clearly not the best option.
- Investment funds - carry out collective investments of their participants. The decision to allocate money is usually made on the basis of a business plan. They support both existing and start-up projects.
- Independent private investors. These can be wealthy businessmen, owners of large capital, and even professional investors who make money from successful investments in many projects simultaneously.
What to do before attracting investments
If the query “I’m looking for an investor to start a business from scratch” is relevant to you, Before you start searching and negotiating, you need to prepare the following:
- Detailed business plan for the project with calculations and payback period. The investor must see over what period his capital will increase. It is desirable that the plan describes the project for at least 1 year (but better for several years), is realistic, and does not contain inflated expectations.
- The exact amount of financial resources required, possibly in several versions. For example, according to the minimum plan and according to the maximum plan.
- A brief and vivid presentation of the project, which will describe all its prospects, strengths, innovation and expected profit. That is, this is a brief summary of why it is profitable for investors to invest in this business.
Attracting investment is quite a difficult task even for existing companies. For those entrepreneurs who raise funds to implement an idea from scratch, it becomes much more complicated. Particular attention should be paid to the business plan: it is on its basis that potential investors will judge the company’s prospects
What types of investment are there?
Investments for business come in two varieties:
- Direct - in exchange for financial resources for the implementation of the project, the investor receives a share in the management of the organization. The money is used to purchase means of production, raw materials, sales organization, and so on. This type includes only those investments after which the investor’s share in the company will be at least 10%.
- Portfolio - the acquisition of an organization's securities (shares or bonds) for the purpose of owning them or reselling them at higher prices when their value increases. The investor who purchases the securities usually does not participate in the operational management of the company and decision making. His goal is not the development of the company as such, but the increase in capital.
What investors like
To understand how to find money for your business idea, you need to know what attracts investors to start-up companies. You already know that experienced businessmen and owners of large capital who only intend to increase their profits most often act in this capacity.
Despite the generally risky nature of investing as a phenomenon, investors like guarantees. The more a business plan demonstrates the reality of payback and increased profitability, the more potential investors will like it.
Don't count on the "wow" effect- it does not play any role when investing. Transparency and realism of all calculations are also highly valued. In other words, the promise of profit should not be fabulous, but based on real numbers and calculations. Among the personal qualities attractive to investors are organization, enterprise, multitasking, the ability to control the situation, predict options and events.
What repels investors
The main thing that will not allow you to find investors to implement your own idea- this is the unrealism of the business plan, errors and overestimations in it, the futility of the project. Investors are looking for an opportunity to multiply their capital and for this reason will not participate in activities that are obviously unsuccessful.
How to find finance - features of finding funds for a project in different sources
Now it’s time to move on to the practical part of the issue and understand how to attract an investor to the project. To do this, we will consider the most popular options and the procedure in each case. An entrepreneur raising funds for his company should use several options at the same time, which will increase the likelihood of search success.
Applying to a bank for a loan
Many banks offer business lending services. True, a novice businessman has much less chance of receiving a large sum of money than an already existing organization. Issuing financial resources to an unrealized project is too risky for a financial institution, so it is very likely that the amount will be reduced or the loan will be refused altogether.
However, if an entrepreneur is looking for where to find an investor for a small business and the amount he needs is really small, it is worth applying for a bank loan. In this case, it is also necessary to have a business plan, including calculations of the required amount. It is quite possible that the bank will require a guarantor or collateral, for example, in the form of the entrepreneur’s personal property.
An entrepreneur raising funds for his company must use several options simultaneously.
Raising capital through investment funds
It is convenient to search for investments and investors through investment funds. These institutions bring together a variety of investors and make mixed and collective investments in a wide variety of start-up projects. Due to the specific nature of their activities, funds treat risks much more simply than banks.
Foundations can be state or non-state. Entrepreneurs whose company has any social or strategic significance for the region in which they plan to operate should contact government agencies. This could be, for example, an asphalt production business: it provides many new jobs (social value) and creates resources to improve the quality of streets and roads (strategic, local value).
If the project does not involve solving such problems, it is better to turn to non-state funds. The most famous in Russia are:"Finance-invest", "SotsAgroFinance", "Adfincom", "VTB Capital", "Sberbank Electric Power", "Gazprombank Asset Management".
Raising funds for a business idea via the Internet
Above we looked at two traditional ways to obtain funds for the implementation of your own project: through a bank or through investment funds. However, now there are other options on how to attract investors using modern technologies.
The most popular and convenient option for raising money to implement a business idea is to use a variety of specialized online services and platforms. Now among them there are already quite a lot of popular and proven ones:
- angel.co;
- startup.network;
- napartner.ru;
- pitchbook.com;
- preqveca.ru;
- business-platform.ru;
- rb.ru/pipeline;
- towave.ru;
- startupnetwork.ru;
- azium.ru;
- shareinstock.com.
Each site for searching for investors invites entrepreneurs to register their project and indicate all the most important information about it - the amount of required investments, plans and prospects, payback period, significance, innovativeness.
The service will show this information to potential investors looking for projects in a similar area of business or who have the necessary funds. Some platforms, providing investment assistance, send out new offers to their registered user base, notifying them of the emergence of promising companies.
To increase the likelihood of raising funds, use several services at the same time. Not all of them are Russian-speaking, but it is quite possible that a business plan, especially a technological one, will also be of interest to foreign investors. This option for raising capital is very convenient and promising, as it allows the entrepreneur and investor to interact directly with each other.
If an entrepreneur is looking for an investor in his business that is already operating and demonstrating success, you can try to find investors yourself.
Independently attracting an investor
If an entrepreneur is looking for an investor in his business that is already operating and demonstrating success, you can try to find investors yourself. For example, post information about the need to invest on your own website, write about it on your social media accounts.
Another option is to issue additional securities. Their implementation will help you find new shareholders (and with them new finances), as well as, possibly, new ideas and steps for the development of the enterprise. However, do not forget that even in this case you will need a business plan from which each investor will understand what benefits the investment will bring him.
How crowdfunding can help
Crowdfunding - that is, raising funds through voluntary donations - is not investing in the truest sense of the word. However, this type of search for money to start your own business is also very promising. When donating through crowdfunding, contributors do not acquire a stake in the company or its securities, but help to release the first batches of goods and get started.
To start collecting funds, the author of the project creates its description on the crowdfunding site and indicates the required amount. With such financing, the business plan is less important. Innovative, technological developments or socially significant, socially beneficial projects will have an advantage.
In Russia, crowdfunding is just beginning to develop. The most famous Russian-language platforms are “StartTrack” and “Boomstarter”. On each platform, you can study the experiences of successful companies that have raised funds in this way and see what ideas are currently collecting donations.
Summary
Finding an investor even for a new project is possible. The basis for searching for finance to implement your own idea should be a high-quality business plan with accurate calculations. Investors are attracted to technologically advanced and promising projects that will help multiply their capital. The most effective way to find investment is to use specialized online services.
— subscription to underwear. If you are also thinking about developing your startup or launching something from scratch, then our experience will certainly be useful to you.
We spent some of our own money on the project to test the viability of the idea, but there were no longer enough funds to grow and test serious marketing hypotheses. Then we started looking for investment and found it.
“Trusbox” is not a pure technology service, but it definitely has the potential for development in the direction of IT, so this is exactly what we were looking for for investments. Technological projects often require lengthy and complex development, and the result is measured not only by the kind of metrics that we are accustomed to based on university economics lessons 10 years ago. So if you want to open a beauty salon or a car repair shop, then my advice, unfortunately, will not work for you. But if you come up with a program that makes the work of a car repair shop easier, you can find investments in the project, following our experience.
Anna Gorodetskaya
My documents: what needs to be prepared
At the first stage of a project, it is often recommended to draw up a lot of documents: a description of the concept, mission, necessary regulations - that is, materials without which new team members will have difficulty understanding what your project is about. It’s not a fact that you will definitely need all the files later in your work, but they will definitely come in handy when you draw up key documents for investors.
- Detailed presentation of the project
You must have a ready document from which a person who has no idea about the scope of your project will understand what you are doing, for whom and how. The document answers the usual questions: what we do, for whom we do it, how we do it, who we are, what are our plans, who are our competitors. If you, like me, are put into a work stupor by open empty files, then use the presentation template on canva.com - they already have structured templates with a minimal design and icons that you can use to visualize processes and numbers. - Project business plan
Even if you haven't made a single sale yet, you should still have an idea of where the money is in your project, even if it's small and not soon. But if your project, in principle, does not involve making money, then perhaps it belongs to the social or art sphere, and sponsors, rather than investors, will help you better. - Road map
A document that will describe what, when and with what forces you plan to achieve. It should consist of several milestones and describe the processes and resources that will help you get there.
LinkedIn Sales Navigator/Unsplash
Where am I: determine the stage of the project
To choose the right potential investor and project presentation strategy, you first need to decide what you have. There is a simple classification for projects in the first stages of development.
- Pre-seed— you have an idea, a team, a working prototype, hypotheses about the audience and sales channels, confirmed by small numbers. That is, you have a project in which there are some people, and the project is working confidently, albeit at low speed.
- Seed- you bypassed all the pitfalls of the previous stage, did not go crazy, did not leave for Nepal, and are now ready to grow sharply and strongly.
Your strategy for finding an investor will depend on what stage your project is at: some funds may specialize in projects at different stages. When you apply to a specific fund, you will need to indicate what your current project status is.
If your stage is a confident pre-seed and you have not yet released, in fact, anything, this does not mean that you will not be able to find an investor. The first option of finding an investor will not require you to have a finished product.
About the benefits of hackathons
If you have a team of developers, even a small one, then be sure to participate in thematic or corporate hackathons. A hackathon is a short-term event (most often held over a weekend) in which teams or individual developers solve one problem voiced by the organizer. In addition to possibly winning an impressive prize that can be used to develop the project, you will meet serious people in your industry.
Companies that hold hackathons are obviously interested in additional products; if they like your project, you have a serious chance of attracting hackathon organizers as investors, as was the case with three teams at once at the “Build a University” hackathon. You can view a list of upcoming hackathons.
If a hackathon is not suitable for you, then nothing prevents you from contacting the investor directly, because thanks to the documents that you have already prepared, you know how much investment you need (although this point will be discussed).
QIWI Universe/facebook
Where to look
1. Follow the trail
If your product is definitely something tech (medtech, fintech, etc.) and it solves a clear problem, then look to the big companies in your sector, many of them have their own investment solutions. For example, QIWI has a separate platform through which you can contact the company with a request for investment.
2. Spying on our neighbors
If you carefully and carefully prepared the presentation of your project, then you probably know all the competitive startups in your industry. Information about transactions is a major information feed that is very rarely hidden. You can check online to see if your competitors have received investments in the last year, and if so, from whom. Feel free to contact funds that have invested in projects similar to yours: this means that the fund is already working with your topic, understands something about it and will be able to evaluate your project for subsequent investment.
3. Contact directly
The simplest and most obvious advice, which for some reason no one uses: just write to investment funds. The Firrma website has a ranking of the most active (that is, those who conducted the most transactions) venture funds for the year. There are both seed and new funds. The algorithm in this case is as follows: you need to go to the investment fund’s website, try to find a project presentation template there, fill it out and send it, along with a covering letter, to the address indicated on the website. Investment funds actually read the letters they receive. They make money from investments and, of course, do not want to miss out on interesting options.
I strongly recommend finding a presentation template for a specific fund and working with it, because in any case you will be asked to provide information in a standard form, and you will simply lose time and some credibility if you do not use a document that is in the public domain.
cartierawards/instagram
One of the formats for reaching investments is startup competitions. Most often, an investment fund and a large company are combined to organize them, and the winners receive prizes from both: in the form of investments, in the form of the company’s services, or both. For example, the “First Height” competition is held jointly by the consulting giant McKinsey & Company and the large investment fund Winter Capital. But the most famous startup competition in Russia is GenerationS. In addition to the main competition, every year there are different nominations, the process of application and expert verification in them can be simpler, so check if there is a special nomination this year on the topic of your project, and if there is, then feel free to apply on the website (list of special nominations located at the bottom of the main page of the site).
Pay special attention to competitions that stimulate the development of women's entrepreneurship. Thus, the famous jewelry house Cartier has a competition program for women business leaders from all over the world.
By the way, it’s not just Cartier that has separate women’s acceleration and investment projects. Read more about the special opportunities in IT for Pink women.
Investor's choice
An important and responsible matter. Because an investor gives you not only money - he gives you connections and the opportunity to make this money even more money.
In addition, investment money is not given for nothing - you can only receive it in exchange for a share in the company. That is, having allowed another participant into your project, whose interests will definitely be exclusively commercial, you must be prepared for the fact that your actions as a project manager must also take into account the possible benefits for the investor.
This is the main difference between investment and lending: the loan can simply be returned and forgotten, and the investor will remain with you until he leaves the project (sells his share). So if your project involves a relatively simple development cycle and does not require a lot of funds, then it will probably be easier and faster for you to take out a loan for business development, and only then attract larger investments to scale the project.
Whichever option you choose, I wish you good luck and courage: no matter the outcome of your investment hunt, the experience of communicating with funds and making presentations will remain with you forever.