Finding Investors by Enterprenues

Content:

• Introduction
• Who is an investor
• Understanding investment
• Finding potential investors
• Convincing investors to invest
• Conclusion

 

FINDING AND ATTRACTING INVESTOR

Introduction:

In every business sector today, the task of securing investment in the market seems very challenging. Although, reports on different platforms lead us to believe that there is plenty of money out there waiting on the sidelines to be grabbed, this is not actually so. In reality, it is very difficult to find investors who are willing to release their resources and channel them for business breakthrough of tomorrow. Investors are gun-shy, and with good reason, not only because of uncertain market conditions, but also because of the country’s government decisions. The idea of this article is to help business owners, most especially the small business owners, decide if it is better to bring partners or outside investors into the business; and to list some of the problems that can occur when taking on partners or outside investors. And also, one should be familiar with some ways investors are found and attracted to business. We will be discussing reasons why businesses especially, small businesses may need investors, types of investors and their requirements, benefits of securing capitals from investors, and steps taken in the process of finding investors. Before we continue with the core objective of this article, let us understand who an investor is and what investment is all about.

 

WHO IS AN INVESTOR?

According to www.investopedia.com, “an investor is any person or other entity (such as a firm or mutual fund) who commits capital with the expectation of receiving financial returns. Investors utilize investments in order to grow their money and/or provide an income during retirement, such as with an annuity”. This shows that, for a business to grow, there must be enough capital coming from the investors to fund its activities. There are different types of investors and ways of investment, some are: Equity financing which is based on the owner of the company selling part of his ownership to other investors, either privately or publicly. In its simplest form, the owner of a company decides to raise some additional capital by selling shares of stock to family members, business acquaintances, or key employees. Another option is a formal private placement of securities to angel investors. Angel investors are generally wealthy individuals who invest in early stage companies or mature companies wishing to expand, with the hope of earning a substantial return on their investment.

UNDERSTANDING INVESTMENT:

Investment means putting money together to work, to start, or to expand a project, business or to purchase an asset or interest with the goal of making returns in future from where those funds are then put to work.

If you are starting a business or you want to expand an existing business, you have to make a decision on whether to use your operations cash flow or source for capital externally. You have to reflect on this for a moment and conclude whether your business needs outside capital sourcing or just the operations cash flow.

If you decide to source capital externally, you will need to also choose between equity and debt which one suits your business. You can take out a traditional loan by approaching a bank to fund your start-up or expansion of business. This will give you full ownership of the business, but the additional capital will appear on your Statement of financial position (balance sheet) as liability. You can also sell equity of your company to prospective investors. This can be a difficult decision to take, but have significant advantages like, you will not have to repay the capital. On your Statement of Financial Position (Balance Sheet), the capital will be listed under stockholders’ equity rather than liabilities. Of course, there are some significant disadvantages, depending upon your point of view. Ones you have accepted capital funding from investors, you must run the business to satisfy all stockholders, provide audited financial statements and also independent auditor.

Now that you have decided that your business needs equity source of fund to start or expand, it is time to know how to find potential investors.

 

FINDING POTENTIAL INVESTORS:

There are places one can find potential investors. One of the best place to start looking for an investor is your local community. You can also check some of the publications made by some business and trade organizations. Your local area Chamber of Commerce will definitely provide resources concerning investors. You can visit www.matogconsulting.com, Small Business Development Center for information about local investors. Another option is regional and state economic development agencies like: http://www.nse.com.ng/, https://www.nigerianstat.gov.ng/, https://www.proshareng.com/market,  https://www.euromonitor.com/nigeria, which help new and established businesses start, grow, and succeed. The following are also places one can find investors:

• Online Fundraising Platforms

Different online fundraising platforms keep increasing for the past six (6) years. They have become highly common with sophisticated and accredited individual investors, angels, and even banks and funds looking for new ways to deploy capital. In Nigeria, the following online fundraising platforms help business organizations to source for investors with ease: kick starter, Naija fund, Fund an enterprise, Circle Up, Micro Venture, we funder, start engine, etc. Even if the online fundraising platform did not fetch you the required capital for your business, it is powerful for getting noticed.

• Events

Visibility is the key to success in business and finding investors. Being noticed by the right potential investors, who you are familiar with, and they know you. Also attending events to meet and communicate with different people is also a great way to find investor, by trying to find out who is attending the event and use the opportunity have a scheduled meeting in order to be productive.

• Social Media:

Taking your business to social media will help you be able to test the market, gain traction and attract potential investors. Social media is one of the cost effective methods of reaching investors. You can take an inbound approach with your own posts and updates, or take a more active approach with collaborations and leveraging sponsored posts or influencers. Direct messages to well-fitting and known investors can also help. It might take only a good and convincing message to connect with them. When it comes to social media, the following are some platforms you can use in finding a potential investor: linkedin, facebook, twitter, and blog. Blogging is another way of finding investor. Even if you do not have a blog for your business, you can also go to the investor’s blog and express your intention by commenting on their comment box giving reasons why he should invest in your business.

• Email:

Simple and convincing messages via emails are able to get the attention of well-fitting investors. For a good email template, you can contact our professionals at www.matogconsulting.com.

• Apply to Accelerators:

General startup accelerator programs always have an open invitation for applications from serious entrepreneurs. If accepted, you’ll likely get a modest check to keep developing your work, as well as introductions to other investors, business advice and help in staging future fundraising rounds.

• Start Sharing Your Product:

Finding investors needs to be strategic in nature to be successful. Sharing your products in public places can help you gain more customers, influencers and also get to your right investors.

 

CONVINCING INVESTORS TO INVEST:

After finding investors to invest in your business, the next thing to do is to try and convince them, by giving them reasons to channel their funds into your business. You can fine-tune your pitch by focusing on what their needs are.

Investors do not like or accept excuses. It is very important that you make investors feel that you are committed and ready to take up the task no matter how difficult it seems to be. Investors can only give their money to people who prove that they can do a lot with little money; those people are very few, and you can be one of them if you really know the right steps to take. The best way to show that you are formidable is to be honestly formidable. Ensure that you get things done. The following steps can be adopted in trying to convince investors to invest:

1. Working on Your Business Plan: After having your potential investors’ attention to listen, you must prove beyond reasonable doubt that your business plan has a strong foundation and is worth convincing. Make sure your business plan is well written to show you have really carried out some research, including financials and market research on the business and you understand how the business works. You can also call our professional business plan writer at @ matogconsulting.com to help you.
2. Quote market research and input from an expert:

Before quantifying your opportunity and prices, seek evidence from well recognized sources, and also spend with consulting firms like matog consulting that are familiar with industries and customers behavior.

3. Sell your business on social media:

Marketing your business is everything you need. The direct and affordable way to market your business is on social media platforms. Also create a box for feedbacks. This will enable you to know how your customers feel about your product and if there is any other improvement to be made on the products or services you provide.

4. Build a realistic revenue model and price, based on cost:

The free model, with an implied intent to monetize later, doesn’t work with investors anymore. It takes real money to sustain a business, with a margin in the 50 percent range, and some realistic milestones and metrics. Sell at least one at full price to a real customer to show traction.

5. Gather customer testimonials and commitments:

Great customer experience expectations these days span the range from shopping, closing, delivery, usability, to support. If you don’t have real customers yet, focus on the size of the pipeline, letters of intent, and penetration into recognized retail and distribution outlets.

6. Show Them the Return on investment:

Explain to the potential investors by detailing to them how your business will generate back their capital with Return on investment (ROI) and how the return on investment (ROI) will end up in their pockets. Show them that the company’s leverage depends on its need for the investment and the tolerance of the owner for oversight by the investors. Investment from family and friends typically does not require the same level of negotiation.

7. Show that you have invested in your business:

Investors like to see that you have invested your money into your business and not only your time. In this case they know that you also stand to lose if something goes wrong. Investors want to make sure that you are fully committed to your business.

In that vein, while it may make more sense to keep your day job and work on your business on a part time basis, most investors will prefer that you are dedicating all the time that is necessary to ensure that the business becomes successful.

8. Reflect for a moment: If you are very ready and prepared to approach an investor, you should also be aware that investment process, due diligence and preparation are equally important for all investors. To evaluate an investment in your company, investors want a comprehensive business plan, a three-five year financial plan, current audited financial statements (if any) and a reason to invest in your business. The next step is to:

• Discuss with a mentor, coach, or matog consulting representative @ matogconsulting.com to help you determine whether your business is ready for outside investors.
• Create a business plan that includes a sound financial statement at matogconsulting.com.
• Read some articles on venture capital published by some business organizations on their website. You can also check our website matogconsulting.com.
• Consult with your mentor or coach as you negotiate the terms of your investment.
• Execute the exit strategy agreed upon during negotiation and enjoy the success of a profitable investment that leads to the growth of your business.

 

CONCLUSION:

In convincing your potential investors to invest in your business is to first of all convince yourself that you are capable of handling the business and your business is worth investing in. the first step to convince investors to invest in your business is to first convince yourself that your business is worth investing in. Believing in yourself is important but yet, you will have to honestly access your startup to know if it has what it takes to become successful. This article will help you to find and attract investors to your business.

About the Author:

Noel Agwulonu C. is a graduate of accounting and has written the final level examination of the Institute of Chartered Accountants of Nigeria (ICAN) as at the time of this publication. He is a freelance writer and a blogger who picks interest in financial matters, business development, Audit and Tax matters.