LIVE EVENT
GCN Investor Conference in Newport Beach, CA
OCT 15 · NEWPORT BEACH, CA
LIVE EVENT
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While a number of entrepreneurs need access to funding at some stage of their projects, finding investors is easier said than done. Determining what type of investment you need depends on various aspects such as the type of business you operate as well as its age, market position, and performance. As a result, learning how to find investors needs to begin by identifying your options.
Entrepreneurs looking for funding have three basic alternatives from which to choose, and each comes with its unique characteristics.
Entrepreneurs in the U.S. may think about getting loans through the Federal Small Business Administration (SBA) or the U.S. Department of Agriculture (USDA), provided they meet the required eligibility criteria.
A significant number of entrepreneurs across the U.S. benefit by getting SBA loans. Partly guaranteed by the federal governments, banks and other financial organizations provide these loans. The SBA helps alleviate the risk that lenders face, making it easier for entrepreneurs to get access to funding. The most popular loans that come from the SBA stable include:
The USDA provides loans and grants for entrepreneurs who focus on rural areas and the agricultural sector. Eligible candidates my use the funds they receive as working capital, for acquiring a new business, for modernization or repairs, for purchasing real estate, for buying machinery, and even for debt refinancing. Common USDA loans and grants for entrepreneurs come in the form of:
When it comes to private investors looking for entrepreneurs to back, you get two main options from which to choose – angel investors and venture capitalists.
Angel investors are usually high-net-worth individuals (HNWIs) who bring funding, resources, and experience to the table. They usually invest their own money and come on board during the early stage of a business. If you find a suitable angel investor to back your project, you might need to look no further for additional funding. However, you need to present an airtight business plan because angel investors tend to look for high returns.
Venture capitalists typically enter the picture during the expansion stage of a business and are able to bring more capital. They invest money of other investors, and not their own. However, they still look for high returns and have a say in how the business is run.
Before choosing a path, be clear about what each type of funding asks of you in return:
A business with steady cash flow may be well suited to debt. A young company aiming for fast growth, with little revenue yet, is often a better fit for equity. Many businesses use both at different stages. For a related comparison, see Bootstrapping vs. Fundraising — Which Path Is Right for Your Startup?
For example, imagine two entrepreneurs. One runs a small, profitable equipment business in a rural area and wants to buy new machinery. A loan may suit her best, since she has the cash flow to repay it and wants to keep full ownership. The other is building a software product with no revenue yet and wants to grow quickly. He is more likely to look for angel investors first, then venture capital later if the business takes off.
How entrepreneurs can find investors has simplified considerably over the recent years owing to technological advancements. While one can look for government and private funding alternatives online, you can also think about going the crowd-funding way through different online channels. In addition, attending pitch events can help you connect with angel investors and venture capitalists from around the world.
From the perspective of investors who’re looking for projects to fund, you need to ensure that your idea or product is unique, that you have a solid business plan and management team, and that you present all financial data in an easy-to-understand manner. If you can do this effectively, your road to finding an investor becomes considerably smoother.
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