Steps for Researching the Right Investment
Unless you’re lucky enough to have access to your own capital, starting out in business often means looking for outside investment. There are many options available – from government grants to angel investors – and it’s tempting for fledgling businesses to take whatever they’re offered. But there’s a lot to be said for researching potential sources in terms of what they want, where they’re based, and who they’ve already invested in, before you decide on your target.
If you choose not to apply for a bank loan, one of the first steps you should take is to look into grant funding. Free support is always worth a bit of research – in particular, check if there are limitations on what how the money is used, to ensure you can still go ahead with your business plan. National and regional government websites will offer more information of the type of grants and their stipulations.
Many start-ups benefit from private individuals known as angel investors. This kind of equity investment requires a portion of your stock or control to be passed over to someone who is essentially a stranger, so confirm whether they’re looking to be passive or active participants in the business before letting them in.
There are plenty of online resources to search for angel investors, but research investors’ portfolios first to see if you match their interests. An alternative way is to approach this from the other side, investigating your competitors to see who provided their capital.
Also search for investors specific to your location, as their level of market knowledge and accessible support may be better for your company in the early stages. Attending a few networking or pitching events can help you get an idea of investors in your community, and at the same time, sort the trustworthy individuals from those who are just looking for an idea to take further themselves.
In general terms, investment is best procured through mutual contacts or an introduction, rather than solicited on your own, and thorough preparation will put you in a better position to secure their interest. Getting the right investment is all about good timing, approaching the right source and doing what’s best for your business; above everything else, research is the tool which will enable you to do this with the most success.