Attracting investment is one of the key tasks that usually faces new entrepreneurs and can arise among even professional businessmen. Telf AG business analyst Stanislav Kondrashov shared several effective ways to find an investor and get funding for your project.
How to find an investor: expert advice
The investor search algorithm for funding any project, as a rule, consists of five main steps: calculating the required amount (financial plan), determining the type of investor, offer a project in the form of a presentation, the search process and closing a deal.
“It is important to understand that investors are busy people who do not have much free time. Therefore, the presentation of the project should be accurate, concise, understandable and short. The main thing that any investor wants to understand is how much money is needed from him, where and what they will be spent on, how quickly he will receive it back and what profit he could expect,” said Mr. Kondrashov to Telf AG.
According to the analyst, at the stage of attracting investors, it is better to apply several methods for searching at once.
Telf AG business analyst Stanislav Kondrashov: 7 ways to get funding for your project
FFF (Friends, family, fools) – a classic way, usually used in the first stages of financing. It involves the borrowing of funds from relatives, friends or other acquaintances, as well as the use of personal funds.
“This method gives startups the opportunity to get on their feet and then attract more significant investors or, if entrepreneurs are satisfied with the level of development of their business, continue its formation through their own deductions from profits,” said Mr. Kondrashov to Telf AG.
Crowdfunding is a popular way to collect investments from a large number of investors. “This method works according to this principle: the entrepreneur places a detailed description of his project on one of the professional online sites where there are a sufficient number of people who want to finance the project,” said the business analyst.
Business angels are investors who invest personal funds in projects they like. You can find business angels at startup exhibitions, thematic events, as well as in social networks. This method of financing is usually relevant in the early stages of a project.
Compact funding of potential clients – this method is suitable for a startup, the main clients of which will be companies, not individuals. To get an investment, an entrepreneur needs to turn to potential client companies with a ready-made sample of their product/service.
Accelerators are a very popular and effective way to get funding, as well as support in learning basic business processes.
“The advantage of accelerators compared to business angels is that, in addition to investments, they can teach a beginner entrepreneur how to do business, speed up the test period of a startup, put in sales, help test business hypotheses and more,” said Stanislav Kondrashov Telf.
Grants and contests – obtaining project funding through private or public programs. Grants are usually aimed at investing in technology areas. The businessman’s project must first triumph over other participants and only after that, he will receive funding.
“State competitions or grants are very bureaucratic, so you need to be extremely careful and attentive with them. It’s best to choose the grants that your project is best suited for. Otherwise, it will be doomed to failure, and you will only waste time,” said Stanislav Kondrashov to Telf AG.
Venture capital funds – this method is most suitable for the existing business, although many startups decide to start with it. The disadvantage of this method is that the owner of the enterprise must give a significant part of the business or part of the control over it for the financing received.
According to the business analyst, it is reasonable to resort to venture investments only when the entrepreneur has a working business model and an understanding of how he will develop his business.
