Securing investors for a company can be a difficult task. However, every year billions of dollars are invested in businesses in the hopes of creating the next great company. Getting people to invest in your company requires a passion for what you are doing and the ability to show the visible risk you are making. This personal investment should be of your time, and more importantly, your own capital. Personal investment will demonstrate your desire to make your company succeed.
Develop an in-depth business plan to present to potential investors. The plan should explain how you intend to make the company profitable. Include in the business plan how you will manufacture the product, why the product is going to sell, how fast you will make the business profitable and what will be the investor's return. The more details that you provide, the more information you'll be giving to the potential investor, and the more likely you'll receive an investment.
Contact family and friends first, and show them the business plan. If you don't need a lot of money, sometimes those closest to you are the best investors. They are more likely to trust you based on your character, rather than just the business plan. These are known as angel investors, because they are lower-ticket investors (a couple thousand to a few hundred thousand dollars) and are willing to invest at startup. Larger investors typically wait until the second stage of the business's development.
Meet with a venture capitalist who is able to invest much larger amounts. Do this after angel investors get you past the initial stages of development. A venture capitalist wants to see that you are committed to the project and that instead of "needing" the money, you are "ready" for the money. In other words, the big investor wants to see that you are risking much yourself, and you're looking to partner with someone to take the company to the next level.
Be flexible when meeting with the investor. Investors want to know that they aren't trying to fit inside a very rigid plan; they want to know that if they have suggestions, they'll be taken into consideration.
Discuss the exit strategy for the investor. The investor will want a percentage on the investment each year.
- Stay focused on the business when meeting with the venture capitalist. Don't talk about your methods of management, for example. Big investors want to know why the business is going to succeed, how the business is going to profit, and what can be gained from the investment.
- Be sure to have some sort of a buy-out clause in any agreement with venture capitalists. If the business starts to succeed tremendously, you might want to get the investor out, so you can reap the benefits. Determine the buy-out clause before you agree on funds.