If you are just starting your business, applying for funding is crucial to the long-term success of your business. Business Incubator is an organization that supports start-up businesses to access bank loans, angel investors, and loan funds.
Deciding on what type of investor you want and/or need:
With different types of equity investors out there, deciding on what type of investor you need is important. For example, different businesses may require different investor types. Whether an investor would be interested in funding your business depends on:
- The location of your business
- The stage of your business
- Your industry
- The financial position of your business
Don’t rule out any investor who is prepared to fund your business. But you should be able to rule out who won’t be interested in investing in your business. For example, if your business just started with little or no revenue at all, you shouldn’t approach large private equity investors. On the other hand, you should know how much money your company needs before deciding on what type of investor to approach. If an investor cannot give all the money you require, you may need a syndicate or have to approach larger investors.
The amount of money you require has a material impact on the valuation of your business assets. Hence, it’s important to be prepared before approaching investors for your business.
Table of Contents
Preparing Your Business For Investment
Prepare your business to attract equity investors. Make sure you prepare a robust business plan, have a board of directors in place, and brush up on your presentation skills when preparing your business for equity investors.
Getting Ready To Pitch To Investors
A good investment pitch is critical for the success of your equity investment plan. The way you present the pitch should be different depending on the investment you are looking for. For example, an angel investor should be okay with a technical or more informal pitch while an established venture capitalist may require a formal pitch with a proposal to scrutinize. On the other hand, a crowdfunding platform may require similar information but in a simplified version. Don’t forget to ask our financial specialists for specific guidance when you decide to pitch to investors. Consistency matters when it comes to the financial particulars of your business, however your pitch should be tailored.
Getting A Valuation For Your Business
You need to know the actual worth of your business before deciding to secure equity investment for your business. In fact, you should be prepared to negotiate when securing equity investment. For this, you should have a clear idea of the actual value of your business. You should also be ready to give reasons for the value of your business since most equity investors may try to lower the valuation of your business during the negotiation process.
Your business should be valued based on its current and future status. The amount of money you need may affect the valuation of your business.
Approaching Investors
Approaching equity investors is a complicated and time-consuming process. These investors are usually approached by thousands of businesses every year. Hence, you need to know how to approach an investor to achieve the best results for your business. There are many ways to approach investors. Investor events are a great way to approach these equity investors. You can also phone and email them. You can also be referred by a contact or an intermediary.
be prepared to accept that you will be rejected by some investors. You should approach a lot of investors and use these opportunities to gain feedback to alter your pitch and improve your chances of succeeding with the next investor.
Agree On Terms With Your Investor
Once you have found the right equity investor and agreed on a valuation or a ballpark figure, the investor may present you with a term sheet. This document will outline the terms of their investment. The sheet will cover the proposed funding, related terms, the board structure of the company, and what happens if the company is liquidated. You should check the terms with a lawyer before you accept them.
Preparing Due Diligence And Legal Process
Potential equity investors will carry out due diligence. Your investment proposition should have detailed revenue projections based on the current and future performance of the company. The investors may need to verify these figures.
When you decide to go through the process of raising equity for your business or property investment, you should revisit this page. In fact, raising equity investment for your business is as much of an art as a science.