6 Steps to Finding an Investor For Your Business

1. Attract investors

In order to attract investors, it’s absolutely vital to produce a thorough and professional business plan.

At this stage you probably haven’t got assets, a customer base or sales figures. Your business plan, therefore, stands alone as a strategy to investors and needs to make both you and your business idea look great.

You need to convey that you have a fantastic idea and that you’re brimming with talent and enthusiasm! You also need to demonstrate that you’ve identified a demand for your product or service, you've researched the competition and know how you’ll beat them, and that you’ve anticipated the risks.

Essentially, you have to make sure investors will be confident that they’ve got a good chance of achieving a return on their investment.

2. Network your way to investment

Before you begin, define your targets and goals. Identify the most likely partners and investors from a guest list, and create a hit list by ranking them in order of priority.

It's important to work on your message. A quick, natural summary of your business proposition can be really useful, particularly if you tend to get nervous and tongue-tied at networking events. You don’t want to get any important details wrong.

When you’re networking, be confident and bold when striking up conversations, and remember to show an interest in others, as well as focusing on your own story.

This final bit is absolutely crucial: after the event, make sure you strike while the iron’s hot by following up with the most promising contacts.

3. Paying to meet investors

Usually, you don't have to pay any fees to find investors. However, there are a few cases where you'd need to pay fees to help find investors. For example, if you'd like to attend networking events in order to meet potential investors you may have to pay an attendance fee.

Similarly, you may have to pay if you’d like to have your venture featured on a website or advertised somewhere. There may also be fees involved during your pursuit of potential investors, such as travelling costs or the cost of taking them to restaurants, etc.

In a more formal sense, there are resources – either platforms such as Venture Giant or actual individuals – that will act as a liaison and introduce you to potential investors. Where an introducer takes an active part in packaging an investment deal, the fees charged will be higher. However, even if that individual is simply arranging an introduction, a fee will be payable, typically equivalent to a small percentage of the investment arranged.

4. Giving away equity

Really, there’s no set-in-stone amount of equity to give to investors. If you're sharing the business 50/50 with a co-founder though, you should each look to be saving 10-30% for yourself. You ideally need revenues coming in so that the valuation if business is as high as possible, letting you justify offering investors smaller pieces of equity.

Offering equity is a balancing act, for sure, and needs to be based on what’s best for your particular business.

5. Investors' influence

Investors have varying levels of involvement in the day-to-day running of the companies they invest in. Some will want to be very hands-on in terms of operations, whereas others will be happy to be a ‘sleeping partner’, which effectively means that their only involvement is providing funding.

In some cases, having a hands-on investor can be very useful, particularly if they’ve tangible experience of working in your vertical. In others, especially if there’s a clash of personalities, it can be more of a hindrance than a help.

Ultimately, the amount of involvement and say that investors needs to be agreed oat the outset, before any investment is finalized.

6. Be transparent with investors

Be very transparent with your investors – it fosters good relations and ensure that should any difficulties arise, you’ll have their full backing and support.

In reality, the level of transparency will largely be governed by your investor’s interest in the daily running of the business. Some investors will want to be kept up to date at all times, while others will be satisfied with an annual report, providing of course you’re achieving your targets.

Whatever the case may be, it’s worth establishing the lines and level of communication the investor expects before taking on a new investor. Managing relationships with other people is always difficult, especially when there is money involved.

Bonus tip: Protect your business

The most common formal way of protecting your business whilst looking for investment is via a non-disclosure agreement, where the investor will promise to keep details of your business secret. However, some investors will be unwilling to sign a non-disclosure agreement before they’ve had a chance to take a look at your business, and you could lose good investors this way.

As an alternative, you could print a confidentiality statement in the business plan itself. You should also consider registering your business name, registering trademarks for your name, brand or logo, and patenting any inventions included in your business plan.

Finally, only reveal as much information to investors as you think is necessary, and research investors in advance to gauge their track record and trustworthiness.