How to Get Investors, Part III: 4 Ways to Find Funding

Two business people shake hands
04Sep

How to Get Investors, Part III: 4 Ways to Find Funding

By Business Growth, Funding and Finances, Innovation-Led, Startup, Technology , , , , , , , , , , , , Comments Off on How to Get Investors, Part III: 4 Ways to Find Funding

You’ve got a business plan and an elevator speech, so you’re prepared for funding. (Not quite? See Part I of our How to Get Investors Guide.) And you know exactly what investors are looking for. (If not, check out Part II: 3 Things Prospective Funders Want to Know.)

Now? Now it’s time to find the funding. But investors don’t hang out on street corners, handing out wads of cash. You’ve got to know who you’re looking for and how to connect with them. In this final section of our How to Get Investors Guide, we’ll cover how to:

  1. Learn about different funding sources
  2. Research potential investors
  3. Leverage your existing network
  4. Build new relationships

Securing capital can be a wild ride. But you’ve got this! These steps will lead you to success.

1. Learn about different funding sources

An investor might not be your only — or best — funding option. Understand the different kinds of funding sources. They generally fall into a few main buckets:

  • Friends and family: Just like it sounds, many founders fund their ventures by borrowing from loved ones. Crowdfunding also falls into this category. This approach is less formal than approaching other sources of capital, but it requires a businesslike approach so that everything is documented and relationships are protected. This guide from Entrepreneur goes into detail.
  • Loans: Commercial bank loans are just the beginning. Lines of credit, equipment lease financing, credit cards and even home equity lines of credit may also be good options for your business. Depending on your venture and your industry, you might also be eligible for loans funded by the government.
  • Angel investing: If you envision an investor showing up with a bucket of cash, that person probably qualifies as an angel investor. Angel investors are high net-worth individuals and groups that provide seed money in exchange for partial ownership of a business. Or, they might get convertible debt, which lets them switch the debt into shares of company stock in the future. Here’s a nice overview from Forbes.
  • Venture capital: After a business has already had investors, venture capitalists (VCs) may come in to invest. VCs are private-equity investors that lend funds from groups like pension funds or insurance companies. Like angel investors, VCs look for the potential of significant growth and want an equity stake in the business. Investopedia has the lowdown.
  • Technology grants: Your business might be eligible for free money. Hurray! But most grants are limited to a specific audience, usually tech startups or nonprofits. Grants have strict application and reporting requirements, and they are not a glorified ATM: Grants take time. There are programs in Kansas City for tech startups and innovation-led companies.

There’s no one perfect funding model that works for all businesses. Know your venture and understand what it needs to succeed. Then, pursue the source — or sources — of funding that best fit your vision and needs.

Resources for exploring diverse ways to fund your business:

2. Research potential investors

You wouldn’t buy a car without doing a little research. The same goes for partnering with an investor.

Your working relationship with an investor and the terms of the agreement can make or break your business. So it’s worth the time and effort to learn as much as you can about prospective investors, whether they are loan programs, angel investors, VCs or friends and family. Yeah, we said it: If something tells you not to get shady Cousin Eddie involved in your venture? Listen to your gut.

Ideally, you research funders before you meet with them. That way, you can go into any conversation with a solid understanding of the investor’s interests and how he or she does business. You can also avoid meeting with funders whose goals and priorities do not meet your own. When you save yourself and prospective investors this time and energy, you preserve that potential relationship for the future.

When it’s time to do your potential investor homework, head to your local library. Kansas City’s library systems — Johnson County Public Library, Kansas City, Kansas Public Library, Kansas City Public Library and Mid-Continent Public Library — have robust and FREE resources that can help you learn about potential investors:

  • Local, industry and business periodicals can help you become familiar with the movers and shakers who can provide advice, introductions or even funding. Think, too, about finding businesses similar to yours. If they find funding, that investor is clearly interested in the industry. Perhaps they’d be interested in working with your venture or know another investor who might.
  • Databases can help you pinpoint everything from demographics to company profiles. GrantSelect can help you explore funding opportunities. And Mergent Archives provides historical corporate and industry info.
  • Business specialists at the library of your choice can direct you to the resources that will best fit your individual needs.

Beyond the library, there are online databases that can provide information about startups and investors. Crunchbase is free. Pitchbook and VentureRadar may charge for access, but the information they provide can be priceless.

Finally, work with a trusted resource when approaching angel investors or venture capital firms. Organizations like the Small Business Development Center at UMKC and the Enterprise Center in Johnson County can offer insight and help you prepare your business case.

Resources to help you learn about potential investors:

3. Leverage your existing network

The most powerful instrument in your entrepreneurial toolbox is your contacts list.

You probably don’t have a seven-figure potential investor on speed dial. But chances are you know somebody who knows somebody whose cousin’s friend … well, you get the picture. And working these connections is important. You want to connect with investors. And investors don’t want to give money to strangers.

In his SCORE Kansas City presentation, “Small Business Funding – How to Find Investors for Your Business,” coach Allen Clary notes that these relationships are often overlooked as founders look for funding.

“You must use your network,” Allen says. “If somebody didn’t personally introduce you to them and they don’t know someone who knows you or something along those lines, that becomes very challenging to gain an investor and close an investor.

“This is something that people often miss. They think of this phantom investor … these strangers willing and interested in writing them a check. And they simply aren’t. High net-worth individuals specifically will typically only write a check on a relatively easy process through someone that they know or somebody that they know who knows.”

This all boils down to:

  • Talk about your venture and your plans.
  • Make the most of LinkedIn and industry, professional and community events.
  • Aim for friendly introductions and firsthand information.

Be strategic and put your elevator pitch and research to good use. Don’t just show up with a stack of business cards and a look of desperation. Funding Circle offers tips for networking success, including:

  • Have networking goals in mind — both for what you want to get and what you want to give.
  • Be picky when attending industry events, and arrange meetings ahead of time.
  • Remember networking is a two-way street. Proactively find ways to support your peers.

Keep in mind that you aren’t just looking for capital. You’re building a business and creating your community.

Resources that can help you make the most of the people you know:

4. Build new relationships

If you want to develop a thriving business, you’ve got to proactively find the people who need you. And you’ve got to proactively find the people who can support you, too. That means being deliberate in how you expand your professional network.

Here are a few things to keep in mind:

  • It’s not enough to show up. Having a LinkedIn profile or dropping by a Chamber of Commerce event won’t do the trick. Make sure your LinkedIn profile is robust, and be diligent about connecting there with people you know from all areas of your life. Post often and interact with others. You’ve got to interact at networking events, too. Make a point to talk to new people and get to know them.
  • Think about what you can offer. If you’re only looking out for yourself, you won’t get far. As you build your network, consider how you can support and assist those you meet. When you connect people with a warm introduction, you might be changing their businesses. Your willingness to help won’t be forgotten.
  • Create and follow up on next steps. Whether it’s a brief meeting or a formal presentation with a prospect, have a plan for later.

“Never leave a meeting or a conversation without the next steps, ever,” says Allen Clary. “Then, follow up. It’s so important, whether you really want to, even if you aren’t so sure about the situation. Maybe you bombed the conversation, maybe you bombed the presentation. You bite down, you make the follow up. You’d be surprised. I have so many examples in my life of people that were able to make great outcomes out of situations that they bombed.”

So if you called someone by the wrong name or tripped over your words? Congratulations, you’re human. Move forward.

  • Never stop connecting. Building new relationships is the nature of business. It’s work that’s never done. Find a rhythm that works for you and make networking a regular habit. Comment on three LinkedIn posts every morning. Attend 1 Million Cups twice a month. These seemingly small routines will keep your energy and creativity up, increase your visibility and help you connect with the support you need.

Growing your network will help you practice your communication skills and find prospective customers. If you don’t meet an investor right away, don’t fret. Finding your business’s financial footing is a marathon, not a sprint. But the more people you meet, the closer you move toward your goals.

Resources that can help you meet people to grow your business:

Other programs that can help move your small business to the next level

Looking for free or low-cost help as you start and grow your business? Kansas City is the place to be, and KCSourceLink is your one-stop shop.

Check out the KCSourceLink Resource Navigator, our list of 230+ nonprofit Resource Partners. Then, turn to our comprehensive calendar of classes and events designed to educate and invigorate small business owners. And if you’re not even sure which end is up, our friendly Network Navigators can create a FREE Personal Action Plan to help you move forward with your business. We know every form of business help in town, so hit us up. It’s free nonprofit help!

Here are a few more stories and resources to galvanize your entrepreneurial journey:

Image by Adam Radosavljevic from Pixabay.

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