Once a startup has established a clean-cut, viable business plan, and is aware of the level of funding needed to reach benchmarks, properly-flowing startups then start searching for investors. This is a giant leap to take when compared to most steps in the startup process. Preparation is key, so it is vital to share several options to consider for startup funding. The following is a guest post from someone who has experienced both sides of the startup and investment coin: Patrick Mackaronis. Patrick cut his teeth as a high-stakes trader and entrepreneur, eventually pivoting into a budding career as a co-founder and director of business development for social media startup Brabble in New York City.
It may take communicating with hundreds of potential investors before finding the perfect fit. Several startups in the New York City area have beaten down almost a thousand doors before obtaining the funding they needed, and investors who saw the value of the product or service.
Here are six solid options for finding the right investors for a growing startup:
1 – STARTUP LAUNCHING PLATFORMS
Many entities have developed specialized platforms providing information, assistance, and research on all facets of business launching. This includes methods to connect startups with investors. Several companies, such as startups.co, provide beautiful and convenient mediums for investor locating in an effective fashion. An additional up-and-comer in the startup launch platform space is Gust, which has already had $1.8 billion invested through its platform.
2 – CROWD FUNDING WEBSITES
Crowd funding websites provide startups with access to several varieties of investor: everything from the general Internet public searching for the next big thing (from sites such as Kickstarter and IndieGoGo) to actual philanthropists looking to assist others in making their startup dreams a reality, such as RocketHub. There are also crowd funding sites dedicated to actual, die-hard investors looking for fresh ideas for funding. An example of such site is OurCrowd. Each of these sites has its own focus of investor incentives. It’s important to select a site that aligns with the strategy and vision of the startup.
3 – ANGEL INVESTING NETWORKS
It is possible to locate a perfect angel investor who will not only invest money into your startup, but will also invest their time, offerings advice, mentorship, and access to their relationship network. A company called Angel Capital Association offers directory listings of angel investors by region and platform type. Additional options for finding investors include AngelList, Funded.com and the Angel Investment Network.
4 – ACCELERATORS AND INCUBATORS
A startup is like a child to the founding team. This being the case, all founders are looking to grow the business into something incredible. Working one-on-one with incubators or accelerators gives startup members a massive repository of investor resources, all aiming at building businesses and helping them succeed. Investors involved with incubators are primarily looking to take on a larger, internal role to assist in turning your startup idea into a viable business model, while simultaneously providing funding to turn dreams into reality.
Some accelerators and incubators offer physical spaces to set up offices, making it a breeze to work one-on-one with investors. Since space if often being utilized by other startups as well, this makes the incubator a wonderful place to trade ideas and flourish as a team.
5 – PRIVATE EQUITY FIRMS
Seeking investment through private equity firms is the traditional method for investor funding. This is the approach that Brabble used initially to obtain its first $8 million round of funding. Private equity firms provide access to funding ranging from a few thousand dollars to multiple millions. The higher numbers are usually reserved for startups in early stages with incredibly strong growth potential across several industries. The main objective of private firm investment is for the investing firm to sell off their stake a few years later for a significant ROI.
6 – FAMILY AND FRIENDS
Discovering investors in family or friends is not difficult. Typically, they already believe in you and have seen the passion you have for your startup’s product or service. It’s important to remember that if you use this funnel for funding, keep everything by the book, and ensure there is a wide berth between your personal and professional relationships. Get everything clearly in writing, explain all involved risk in startup investment, and make sure it is made clear that investment does not come with a guarantee for repayment.
Do not be discouraged if your startup is not completely flooded with investment offers right off the bat. Don’t get depressed if you are rejected… multiple times. The key is to not give up the dream. The right investor is out there who aligns with your goals and objectives. The hardest part is finding that perfect match.
Patrick Mackaronis is a veteran of the startup scene in New York City. He can be contacted via Twitter at @patty__mack.