It can be difficult to get enough money to start a business. It is an involved task itself, because the person appealing for the money has to sell themselves, and their company image in order to convince banks, loan companies, friends, and families to pitch in and help. Other external sources to get money without turning to loan companies include venture capitals and angel investors.
One two-way method to get money to start a business is with venture capital firms, VC for short. These are companies that inject money into beginning companies in return for equity stakes in the small business. These businesses are usually very selective, and will only invest in well-established small businesses which can make a profit. Their hope is that the business will receive an intial public offering, or IPO, or will be sold out to a larger, existing business so they get a return.
There is a lot of competition to receive VC funding according to Steven D. Strauss, USA Today business columnist, because the firms might get more than 1,000 appeals a year for money, and they want larger businesses which need assets of at least $250,000. The startups they are interested in are usually the ones that appear to have much rapid growth potential.
Sometimes we just don’t have a rich uncle who we can always count on or enough items to sell to get that extra money we need to get money to start a business. Thankfully, there are plenty of philanthropists who like to help out people in need. These philanthropists are known as angel investors. They usually have their own successful business in one particular industry, and want to help out others so they can find new chances in that same industry to continue their success. It is a symbiotic relationship, so to speak, because your business will help his or her business.
An angel investor is an angel on Earth: they can give you money to start a business so it can get started. They can also use their wisdom to help you be a better entrepreneur as well. They have made plenty of mistakes in their course of business, and so it’s useful to learn what they already know. Additionally they can open doors for your business because they know many different contacts.
Talking to angels can be difficult, but you don’t have to go to Heaven to find these angels. These angels of Earth lay low, and you have to search for them by asking around. Other business owners or money advisors may tell you who they are. What makes it less challenging is that there are networks of angels. They are very good people to come into contact with to help you get funding to start a business.
Here is a list of these angels, both by themselves and in organizations:
- https://www.angelinvestmentnetwork.co.uk /
Talking to an angel needs a special approach. You can cold-call their office and arrange an appointment, or you could talk to one during an investment convention. You can meet them in groups as well while they hold meetings. It is very important to make a strong impression with an angel investor so they will want to do business with you in order to help you with money to start a venture.
The snag with angel investors according to author Bernard Schroeder is that they only do about one to three deals per year, and only give about $25,000 to $100,000. He also adds that they meet very few clients per month, which is around 15 to 20 potential candidates. It is very rare to capture an angel investor’s attention, but they are a better alternative to using a venture capital firm to invest money to start up a new business.
Grabbing an angel investor’s attention is like writing a grant: You need to practice your concept like a finely-tuned violin until you have everything absolutely perfect. You need to tell him or her why your business will be great in the market, why you are good as management to run the business, how much of a return your angel will get, and why customers will like your product. It is a very short pitch, also called the “elevator pitch,” because your appeal should only take about two minutes.
Overall, venture capitalists and angel investors will make a small-business owner remember their college grant-writing classes in order to appeal for money. It takes skill, first impressions, and quite frankly a lot of luck to find the right person. It will take a lot of work, and is an ongoing relationship with the person who gives you the money to help you out, but will be well worth the effort in the end.