It's hard to believe, but locating investors is not the hard part of getting funded - in fact, through the process of trying to raise money, an entrepreneur might have opportunities to talk to upwards of 40 to 50 investors, depending on their idea and location.
However, just as it takes a quality idea and pitch to find success, it also requires a quality investor - one who works in the same field as the company, one who is able to shed wisdom throughout the development of the company, one who can come to a reasonable financial agreement that suits all parties involved. And that doesn't come without due diligence, a well-crafted pitch with a realistic business plan, and a lot of research.
When you're looking to start raising for your company, consider these five ways to find angel investors, and five ways to find venture capitalists.
1. Through top-tier business schools
Call the closest university with a strong business or entrepreneurial program. They generally have a strong network of investors and successful entrepreneurs from their faculty, alumni, and guest speakers. Ask them if they might be able to point you in the direction resources.
2. Through your industry friends
If you know of other founders of companies similar to you in your industry who have found investors, ask them for their recommendations. As many investors specialize in specific markets, like biotech, retail, travel, or mobile app developing, they tend to find companies through networks. So secure yourself within those networks, do your research on angel investors who work in your field, and try to get an introduction.
AngelList, Microventures, LinkedIn, and even Quora can be effective sources to find angel investors. With online resources, be sure that you can establish some sort of credibility. The easiest way is by looking specifically for investors in your own market (so, AngelList makes it easier, as it sorts investors by region or industry).
4. Angel investor networks
Angel investor networks are member-based networks that tend to service by location. They are often operating from a fund that has been set aside by an investment firm to source deals for the network. Applications are prescreened, the angels can retain their anonymity, and founders can find themselves getting offers from up to a hundred investors for one venture (as opposed to going from angel to angel individually).
5. Crowd funding
With all the crowdfunding platforms available, some with targeted industries such as arts, science, business, startups, and others with angles like equity investments, loans, and venture networks, those who want to get seed funded have plenty of opportunities to try their hand.
Ideal for companies who are either active participants in their industry (say, a new indie production company who has close ties within the film industry), or founders who don't mind the bare minimum of guidance, or people who are extraordinarily good at social media and customer outreach, crowdfunding is a viable option to maximize the number of potential views by investors in one go.
6. Your city's entrepreneurial community
Perhaps the first thing you should do when you're ready to take your project out of the garage is to get involved with the other founders around you. Join regional tech and startup groups on Facebook and LinkedIn, attend events, help out with an organizing committee, and meet as many people as you can. And be a human being, not just a pitching machine - ask for advice, but also give advice when you can; talk about struggles in the life of an entrepreneur, and get to know some of the other founders, investors, and the tech community around you.
When you connect with the members of your community as a human first, then you can build stronger relationships and work together to help each others' companies cross the finish line.
7. Prove you are market ready
When you're at the stage to start pitching to VC, you should be established in some way. You could have major name recognition, or your company could have a huge social media presence; your prototype should be working and showing signs of traction.
You should prove that there is a market for your product. Scan your business model and associated numbers through a calculator, and make sure that you can defend your model when you (inevitably) get asked for it. The more risk that a potential investor can see in your company, the less they'll want to invest in it.
8. Do your research and compile a list
Take an inventory of your immediate network of industry people, and compile a list of investors they suggest that will align with your vision and goals. With thousands of venture capitalists across the country, all you need is a solid list of 30 to 50 who can give you at the attention and capital investment that you're looking for - and the best come recommended.
Tap into investors in your network, reach out to them in a low-stakes environment, lay out your ideas, ask for feedback, and always incorporate their advice into your next pitch.
9. Through your mentors
If you don't have industry mentors, you should consider connecting with a few before you start shopping around for investors. Your mentors see you through significant parts of your journey; they get to know your company, and you as a founder, and also have the experience to offer their guidance to help you navigate the industry.
They could be successful entrepreneurs themselves, or investment experts, or leading influencers in your field. Likely, they will help you to understand what investors are looking for, or even introduce you to some who could be potentially compatible with your vision.
10. Apply to Accelerator programs
Offered by investment firms, seed funds, universities and other large established entities, accelerator programs are found pretty much all across North America. Some of the top accelerator programs are hugely competitive, like YCombinator and Techstars, but the payoffs are big. Basically weeks-or months-long boot camps for the sole purpose of launching a company with classes and talks by highly regarded entrepreneurs,
Accelerator programs are a great way to meet other founders, get real-world guidance from industry mentors, and smooth out some rough edges. Some accelerators offer a seed investment in return for equity, and they usually culminate in a Demo Day presentation in front of an audience of investors.
Looking for funding for your start up can be overwhelming, but these 10 strategies are the ideal place to start.