How to Find Investors for Your Business

Learning how to find investors for a small business doesn’t have to be as stressful as you think.

Thanks to the rise of online resources and startup incubators throughout the U.S., looking for investors is easier than ever.

Knowing about the different kinds of investors, what they can offer and how to find the right one could give you a leg up when trying to finance any stage of your business’s growth.

We’ll break down the various types of investors and which could be the best fit for your business. We’ll also take a look at the several options for connecting with investors, such as:

Demo or Pitch Days
Networking
New Connections
Online Resources

Who Are Small Business Investors?
Small business investors are individuals or groups looking to finance businesses they believe have the potential to provide them a significant return on investment (ROI).

Investors share the same overall goal: make money. But they’re still people, each with different interests and characteristics. Learning more about who these people are is useful in your search to find investors for your business.

Many specialize in certain industries or business models. For example, an investor who has a history of working exclusively with construction companies would be unlikely to finance a restaurant startup.

Some investors have motivations beyond the realm of industry, choosing to help small business owners with specific racial, ethnic, religious or economic backgrounds. Clearly, an investor who wants to help small business owners in poor, inner-city neighborhoods would be less likely to fund a business in a wealthy suburb.

Types of Small Business Investors
There are 2 main types of investors that small businesses use: venture capitalists and angel investors.

It’s important to know which type is best for you when you search to find private investors for your small business.

Venture Capitalists
Venture capitalists (VCs) usually invest large amounts of money (from $100,000 into the millions) with a goal of matching it with a large return.

Venture firms generally invest the money of others, acting like a trade broker who manages stock portfolios. They do the due diligence necessary to make sound investment decisions, ensuring returns to the members of their group.

Venture capitalists tend to focus on businesses with huge growth potential that have opened up a full seed round.

If you’ve developed a groundbreaking app that has the potential to make millions of dollars, you likely will have VCs highly interested in getting in on the ground floor.

For most small business owners seeking smaller amounts of funding (below $100,000), VCs won’t find the modest returns worth their investment.

Note that many VCs will want to be involved with your board if you have one. This takes some of your power away. Also, if the company doesn’t perform, VCs could vote for new leadership to run your business.

What Is a Seed Round?
Many companies open a “seed round” of investments to raise money for early-stage expenses. This is your initial chance to find potential investors who can provide a large chunk of the funding you need.

Usually, a seed round ends with businesses raising large amounts of money, albeit with a price. This option likely will require you to give up a good bit of equity in your business.

Make sure you really need the amount of money you’re asking for and have the correct valuation for your business. The last thing you want to do is give up too much equity and not be able to reap the benefits of building a successful company.

Angel Investors
An angel investor typically is an individual who invests their own money into smaller, early-stage businesses.

If you’re searching for a single investor or 2 and don’t plan on opening your business to a full round of investments, angel investors might be your best option.

Angel investors don’t typically get very involved in the businesses they back, so you don’t have to worry about placing them on your company’s board.

How to Find Investors for Your Small Business
1. Attend ‘Demo’ or ‘Pitch’ Days
Demo days (or pitch days) get entrepreneurs in front of a group of investors looking to find the next big thing.

The structure of these days is a bit like the TV show “Shark Tank”: Business owners pitch their ideas to a group of investors, who try to learn more about the company before setting up another meeting or negotiating the terms of a deal.

Many investment groups and startup incubators hold these events, so make sure to follow these organizations closely to find the next date.