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How to Attract Investors to Your Small Business

One of the merciful truths about starting up your own small business is that there typically are scads of “angel” and other types of investors ready to help you out early for a share of the rewards later on.

The only problem? They tend to be a little choosy, which means you have to learn how to stand out in a crowd.

We’ve recently explored the idea that many small businesses can get off the ground with less than $25,000, but even that bar might be difficult to reach early on, and other types of companies need considerably more. There are many ways of finding small business financing, of course, but private investors and venture capitalists offer a few upsides past just funding, including business expertise, legal and tax support, even making connections.

But how do get a VC or angel investor to pick your company over dozens or hundreds of companies vying for their attention (and money)? Here are a few tips.

5 Ways to Score an Investment in Your Small Business

1. Know Where to Find ‘Em: Before you can actually make a pitch, you need to find the investors who might be interested in where you can take your business – and where your business can take them. The most direct route is online resources designed to put you in touch with investors, such as AngelList for angel investors or MicroVentures for crowdfunding. That said, even good ol’ fashioned networking can often put you in touch with the right people. That can mean making new acquaintances on LinkedIn, reaching out to people you’ve met in your industry or even talking to your old business college about potential funding connections.

2. Research: There’s two types of research you’ll need to delve into – research into your market, and research into your potential investors. On the market side, you’ll want to do some serious digging into the opportunity your business wants to tap. This can include anything from researching prospective customers via surveys and interviews, or more data-focused gathering, such as tapping public demographic information or private market reports that tell you how much money is up for grabs (and will be in the future). But you need to actually research prospective investors, too, including identifying investors that are most attuned to your industry, and figuring out what qualities these investors value in prospective ventures.

3. Build a Pitch: Actually, you’ll want to build two pitches – an “elevator pitch,” and a proper pitch. The elevator pitch is an abbreviate pitch that gets its name from the idea of being stuck in an elevator with a potential investor and having to sell your company in just a few seconds before they get to their floor. It’s a concise description of your business and the potential opportunity – enough to tantalize an investor in wanting to hear the details at a future meeting. Then there’s the full-blown pitch, where you divulge all the details, including the aforementioned market research, but also your own marketing strategy, business model, potential risks and even your budget.

4. Practice Your Pitch: It’s one thing to draw up a list of all the information you’d like to present to a potential investor – it’s another to actually deliver it. And if you make your pitch cold, you may come across as unconfident, nervous, ill prepared and even lacking passion in your own business. Practice your short pitch for numerous audiences to get an idea of whether you’re able to “hook” people with what you’ve got. You should also go over your long pitch a few times, preferably with a business connection or two who can not only give you pointers on the pitch itself, but also can prepare you further by asking you impromptu questions that a VC or angel investor might ask.

5. Find Out What You’re Worth: You very rarely get something for nothing, and you shouldn’t expect to get an angel investment with no expectation of a return. It’s very likely that a would-be investor will want some sort of share in your company’s equity. But how do you decide how much of the company you’re willing to part with? How do you determine a starting point for your company’s worth that you can base future growth on? You’ll need a business valuation – and McManamon & Co. can help. We are an accounting and business services firm that helps small and midsize companies with numerous aspects of starting and growing businesses, including providing business valuations for a variety of situations, such as finding investment capital.

Call McManamon & Co. at 440.892.9088 or contact us online today, and let us help you prepare to find that business-changing investment.

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