Consider the case of the poultry company Hip Chick Farms. The ability to find private investors helped the Sebastopol-based chicken company land a deal with Whole Foods.
To fund their poultry start-up, Hip Chick Farms took out:
- Four loans
- a successful Kickstarter campaign
- Cash investments from friends and family
- a $1.5 million equity deal.
Hip Chick Farms’ origin story offers a brief glimpse into the many methods available for entrepreneurs to find independent investors.
To help get familiarize you with the shifting investment landscape, here are some tips on how to find private investors for your business.
Guide to Find Private Investors for Your Business
Let’s start by taking a look at what private investors are and why you might want to involve them in your business plan.
Why Private Investors Are Beneficial For Independent Businesses
Small- and medium-sized business owners are at a distinct disadvantage when it comes to getting loans from major financial institutions like banks or credit card companies. Even with the best-laid business plan in the hemisphere, your business still poses a risk to the bank.
Independent businesses make much less revenue than larger corporations and are more likely to default on loans. As such, only 24.1% of small-business loans were approved by big banks in February 2017.
Those aren’t great odds.
Still, banks are the most established way to fund a business, so it might be worth your while to start with a bank loan request. Independent investment opportunities will still be there for you if it doesn’t work out.
Types of Independent Investors
We’ve worked with all different kinds of investment configurations at Pembrook Capital Management. Here are a few of the vast array of independent investment options that we’ve found.
Venture capital is often available for startups that are expected to be high-growth. That could mean in profits, employees, or industry clout.
Investments come from venture capitalists, who will invest in a startup in its early days then cash out when it’s profitable to do so.
Venture capital tends to be a longer investment than your traditional bank loan. Venture capitalists also tend to have a heavier hand in how a business is run, as they want to protect their business.
Signing on with a venture capitalist investor is kind of like taking on a silent partner or a majority shareholder. Take that under advisement in your business strategy.
Private equity is the money and resources invested by private individuals. That could be your own or through people you know.
Generally, private equity investors will invest in hopes of cashing out in a few hours for a modest profit.
Private equity investments might be considered ‘the friends and family loan,’ although there are other networks you could mine for investors, as well.
Angel investors have been becoming increasingly en vogue, these past few years, as more companies come out of left-field to disrupt their respective industries.
Angel investors are typically individuals with a lot of resources that like to invest in promising startups, in hopes of large returns. Angel investment is also a way for investors to exercise their philanthropic urges by backing businesses they believe in.
Where To Find Private Investors
There are government organizations to help you find independent investors for your business. There are also more online options than you can shake a track wheel at.
Here are a few ways to find private investors for your business.
Small Business Investment Association (SBIA)
Small Business Investment Companies (SBIC) have invested nearly $60 billion in 107,000 independent businesses since 1958. It is in everyone’s best interest to put excellent business-owners with investors looking to help out and earn a tidy profit along the way.
The SBIA is one of the first places you should start when seeking alternative investment options. Their homepage is chock full of resources and information for business owners, as well as providing ample networking opportunities to find potential investors.
Crowdfunding encapsulates what is best about using the Internet for business when done properly.
Crowdfunding sites like Kickstarter or GoFundMe give you access to untold numbers of potential new investors. This gives the opportunity for a lot of people to give a little, instead of using your personal network having to shoulder all of the financial burdens.
How To Set-up a Successful Crowdfunding Campaign
Setting up a crowdfunding site can serve as a business plan, a marketing strategy, and a fundraising method, all in one.
You’ll need to lay out your business plan in an understandable way to entice your investors. This will serve as the layout for your crowdfunding proposal on your website.
You’ll have the opportunity to identify your Unique Value Proposition (UVP), as well as what sets your business apart from the competition. These will come in handy during the marketing phase.
The next step is to post regular updates on your crowdfunding site. Blog posts detailing your project’s progress always make for good content. Video testimonials from satisfied customers can also help to subtly persuade your investors.
Benefits Of Crowdfunding
Crowdfunding allows the opportunity to both advertise your new business, while simultaneously looking for funding. It’s hard enough to get people to look at advertising, these days. Get people invested early and they could see your marketing updates for the duration of your crowdfunding project.
Crowdfunding also allows the possibility of conducting market research from your investors. Corporations pay thousands of dollars for market testing. In this instance, your customers are essentially paying you to give you ideas.
These are just some of the ways to find independent investors. Start to dig in and delve, and you’ll be amazed by the array of ways there are to fund your startup and leap into entrepreneurship.
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