Guide to Finding Seed Investment and Small-Business Investors
Brand-new small businesses need money to grow. Yet brand new small businesses rarely make any money at all. With the frustrating irony of “you need money to make money” many small business owners find themselves at a loss. This is where a seed investment comes in.
If you have a new idea for a start-up or have just launched your new business, you are probably on the hunt for small-business investors. And unless you have built your own business before, you are probably not quite sure where to even go about finding investors.
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This article will show you how find investors that will land you the funding you and your business desperately need. We will answer your burning questions such as:
- What even is a seed investment? And who is a seed investor?
- What options do I have when looking for private investors for small business?
- Where can I find a business investor in person?
- Where can I find investors online?
- Are there any new methods for finding investors I should know about?
Options for Funding Start-Ups
Before we dive straight into looking for investors, know that there are quite a few options for gaining capital for your brand-new start-up.
- Funding the start-up yourself: With more and more free and cheap tools available online, some smaller business start-ups can pop up on your finances only.
- Looking into grants or loans: Banks and other financial institutions offer loan options for small businesses, and the government even has some grant options. (Learn more on the Small Business Association website.)
- Finding investors: When funding your own start-up or seeking a loan does not fulfill your funding needs, looking for small-business investors is your next step.
This article will focus entirely on this third option: finding investors that will make your start-up dreams a reality. But first, we will define what a seed investment is and who seed investors are.
What Is a Seed Investment?
A seed investment, also called seed funding or seed money, is the early funding you gain from some sort of business investor to help you start your new business. This seed money is given to you when you offer the seed investor something in return. Typically, this will be a stake in your new company.
What typically makes this early investment funding stand out from other investments is the age of the business. Normally, the “seed” suggests you are in the first baby steps of your start-up, planting the foundational seeds (funding) to make your new venture grow.
As Forbes points out when discussing getting your seed investment, “Don’t simply think about how much you need to reach your first milestone; you need to be planning about 5 milestones in advance.” Keep this in mind as we show you ways to find a seed investor.
How to Find Investors for Your Start-Up Venture
So how does one even go about landing this seed investment; where do you find a seed investor? If you are asking yourself these questions, we have seven possible answers for you below.
When it comes to looking for investors to supply this early investment, it may feel like you do not know where to turn. Surprisingly, there are many options for finding small-business investors to start you out on your business journey.
Try one or all of these methods to find the right private investor for you.
Start-Up Investors Option #1: Family or Friends Funding
This first option may seem obvious to some, or completely out of the question for others—yet, looking for investors within your own circle of closest relationships is not an idea to completely disregard. It can be beneficial.
Unlike most other private investors for small businesses, you will not have to prove your work ethic, drive, or integrity to those who know you the most. Just make sure to create a professional negotiation, so nobody feels taken advantage of and to keep this professional journey separate from personal life.
Two ways to keep the relationship of your family or friends being a private investor professional are to:
- Take time to ensure there is an equal exchange opportunity. While some family members may suggest they just give you money, you might feel more comfortable if you know you are giving them something back. Decide what you are willing to part with ahead of time.
- Create a written contract. In the event that some bad blood starts brewing after you have been given your seed investment, you will have clear boundaries set up as the nature of your agreement.
Start-Up Investors Option #2: Angel Funding
In the search for seed funding, checking out angel funding options is a must. Angel investors, typically through an angel investment network, are wealthy and experienced individuals who offer their resources and knowledge to start-ups.
In exchange for equity (or whatever other sort of agreement you decide upon), an angel investor can provide that start-up capital you need to get your business off the ground.
You can find investors online through various angel investment network groups and websites. Some of the more popular options (where you can begin your research) are:
Start-Up Investors Option #3: Online Crowdfunding
This source of gaining necessary capital is becoming more popular, and it is another way to find investors online. Crowdfunding allows you to create a profile that highlights your new business. Then you can find investors online you may never have dreamed of, most often from the general public.
Many crowdfunding sites allow you to offer something in exchange for a pledge of financial support. For example, if you have a tea business, you could offer free tea to your new small-business investors who have pledge a certain dollar amount.
This setup encourages a small private investor to give and allows you to get your great new product in the hands of the public. It is a win/win for everyone.
Popular crowdfunding sites that could potentially lead to great small business investors include:
Start-Up Investors Option #4: Incubators or Accelerators
Partnering with accelerators and/or incubators can be an opportunity of a lifetime for those looking for start-up investors. Both incubators and accelerators give new small businesses resources—often office space, various networks, an investment network, consultants, and advisors. But many offer to fund a seed investment for you as well.
The main difference is this: incubators tend to keep you on for a longer period of time as small-business investors, and accelerators try to make the process intense and fast. Both have pros and cons.
Forbes put out a list of their top accelerators for small business. These accelerators have helped booming business such as Airbnb and Dropbox. If you are looking for investors, check out this list of accelerators that includes:
Start-Up Investors Option #5: Lending Platforms
Find investors online willing to loan you a seed funding through the popular lending platforms. Instead of going to a financial institution for a loan, lending platforms connect you to a seed investor on a peer-to-peer lending basis.
Essentially, you get the financial benefits of a bank loan. But you also get the benefits of working with and connecting to real investors for small businesses.
These online lending platforms do all the “middle man” work to connect your small business with small-business investors. You can potentially get loans for hundreds of thousands with set fees and set loan term length. This allows you to find a business investor in a way you may not have been able to before. When it comes to finding which lending platforms feel the best for your seed investment, try one of these two options highlighted by Top 10 Reviews.
Start-Up Investors Option #6: Social Media Network
Facebook, Twitter, LinkedIn, Pinterest, Yelp—options from these social media sites give young start-up businesses quite the networking force to tap into from anywhere in the world. Social media is a huge asset in order to find private investors for small business.
Social media networking options can benefit you in the pursuit of finding investors in multiple ways:
- The more you network, the more options you have to find potential start-up investors from everywhere. Your potential small-business investors will also be able to get to know you first through the social market.
- Your presence on social media is free marketing. When you have this presence on sites like LinkedIn or Facebook, potential small-business investors could actually find you.
- Through social media, you connect with other start-ups that may want to trade. Your “seed investment” in this case could be company photographs from a growing photographer, website copy from a growing copywriter, etc., in exchange for your product/service.
Popular Article: Angel Investor—Definition and Overview of the Investing Process
Start-Up Investors Option #7: Network a Private Investor
While it may not seem like the most innovative concept, tapping into a traditional investment network in order to find a seed investor is a tried and true method. Finding investors by good old-fashioned person-to-person local networking can be highly effective.
In the digital age, many new entrepreneurs may not know how to find investors in person. Some ideas to get you networking and finding necessary funding include:
- MeetUp: MeetUp connects you to people in your area with common interests. While they often connect people interested in hiking, book clubs, cooking, etc., there are certainly many business groups you can find too. Anytime you go to one of these events, you could be meeting a business investor.
- Go Everywhere: Remember that you may not meet your future private investor at a business function. You could meet them at yoga class, through a volunteer project, at your church, or through a fellow parent on your kid’s soccer team. Make yourself visible and present in all community activities.
- Chamber of Commerce: This may seem like another “old school” method, but getting involved in your local Chamber of Commerce is another solid way of connecting with a potential small business investors.
How to Find Investors That Are Right for You
We have gone over many methods for finding investors for this year. Now it is time to figure out which methods will provide you with access to the investors for small businesses that you feel will be the most beneficial to your budding venture.
Take a moment to decide which methods would be most effective for finding start-up investors interested in your particular start-up and come up with at least three actionable steps you can take today to make that connection a reality.
Set up a crowdfunding site, sign up for a local meet-up, research possible angel funding opportunities, or create a business pitch to give to your retired uncle, and before you know it, you will have found some way—or many ways—to get investors for small business in order to start your year off right.
Read More: Small Business Ideas for Women Entrepreneurs
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