How and where to get investment in a startup – experts say

5 min


There are 2 obvious ways to raise money: loans and investors. Compared to the investor’s share, the loan is cheaper: the interest is small, and you will close the debt after some time – and you will always pay the investor. On the other hand, you are not obligated to return the investment to him – he only receives a percentage of the profit.

Where to look for an investor?

Your relatives and close friends

This option cannot be ruled out. And they need to sell the project to them in the same way as an ordinary investor: total preparation, presentation, conclusion of an agreement. Don’t expect them to invest their money just because they know you well.

Your notebook

Anyone has hundreds of contacts on their phone. Among them there are both potential investors and those who can introduce you to them. Don’t forget about old customers and suppliers as well.

Friends on social networks

There are hundreds or thousands of contacts here. You don’t need to ask them for money. Call and write using a special technique – “Consult”. Example:

Hi Aleksey!

I would like to consult. I am now opening a franchise business and looking for an investor. The risks are minimal, everything is already very well developed and ready to launch. You can earn from 30% per annum.

Maybe you have friends who will be interested in it?

Top managers and company owners

There are many top managers in Russia, and many of them earn more than 300-500 thousand a month, or even more than a million. Many of them seek to create a safety cushion for themselves, so they are looking for niches for passive income.

Also, many small and medium business owners are looking for new directions, are bored in their niche and want something new.

Look for them on social networks: Instagram, Facebook, classmates, VKontakte. Put together a short, good pitch and write to anyone you find with an offer to meet or call. The letter should be short and succinct. Example:

Good afternoon, Alexander.

I found your profile in the Alfa-Bank group. My name is Sergey Degtyarev, I am from Moscow. Now I am starting an IT business in Novosibirsk. This is a business that has been successfully operating in 90 cities of Russia and the CIS, but it is not yet in our city.

I am looking for an investor to develop this project. Profitability for the investor – from 50% per annum. This is a really worthwhile project to look out for. Give me 10 minutes on the phone and I’ll tell you more.

You can also come to the office, for example, under the guise of a client and find out where the manager’s office is. Include imagination. Meet and communicate with tops and entrepreneurs as much as possible using the “Consult” technique and sooner or later you will be introduced to the right person.

Investors

People who are purposefully looking for businesses to invest money also exist on social networks, in addition, they can be found attending investment events, investment clubs, business angel communities, and small investment funds.

You can even place ads on Avito and similar services. Among our partners there are those who found investors there.

Crowdfunding and investment platforms

On such platforms as Boomstarter, Planeta, Kickstarter, ordinary people throw off small amounts of money on interesting projects. They are not investors: instead of a share in the business, they receive free goods or services from you.
On investment platforms such as StartTrack, people unite to become real investors in the project. If you do a strong pitch, then there is a chance to get launch funds this way.

How to attract investors?

Experienced investors first choose people to invest in. They look at the project only secondarily. Hence the basic rules when looking for an investor:

Appearance

You can only make a first impression once, so dress appropriately. In a suit and tie, you can go to an investment fund or a company with a business dress code, but for a meeting in a more informal setting, there is no point in dressing in a suit: you just need not to create a repulsive impression.

Total Confidence

To stick to this rule, do not put too much weight on each meeting. There are many investors, and this is only one of them. Just do your best in the best possible way.

Know your product well

Bring visual materials with you – a very short and understandable presentation and financial model. Your pitch should convey to the investor:

  • essence of the product;
  • why you want to do it;
  • than the product is better than others;
  • why you need to invest in this particular niche;
  • why this business will last for many years;
  • what are his prospects;
  • how much the investor will earn.

Prepare for the meeting

Prepare questions for the investor and get to know this person as best you can from open sources. Make sure you want to do business with him. Find out where he worked, what exactly he did, what businesses he built, why he left them.

Take preliminary steps on the project

The concluded contracts, the selected locations, the assembled team are better than just an idea: they will confirm the seriousness of your intentions.

Listen to your intuition

Your task is not only to convince the investor to invest money in you, but also to understand: do you want to work with this person? Ask questions, understand its values ​​and goals. Find out why he agreed to the meeting and what interested him? Has he invested before and has he been successful? What is his relationship with partners?

Listen to your intuition and do not start working with those in whom doubts arise. Looking for a business partner is like getting married. You will not make a marriage proposal to someone you are not sure of?

Don’t settle for unfavorable terms

You offer the terms, you choose the investor. Even if the investor says that he will work with you only on his own terms, this can only be the beginning of negotiations.

Do not drive horses

Don’t rush the investor. Perhaps he hears about you and the project for the first time, he needs to figure everything out. Give him time to think, understand, evaluate all the details. Do not rush the investor and under no circumstances.

Your goal for the meeting: “sell” yourself, the project, the numbers and make the next meeting. Capture any questions and doubts to prepare the answers for your next meeting.

How to work with investors on your terms

The most popular options in the case of microbusiness: either the investor gives you a loan, or he buys a stake in the business and becomes a co-owner.

Loan

Here you can agree on 20-50% per annum. If you have liquid security (real estate, car) and its cost is higher than the loan, then the money can be obtained at a small interest. The loan is formalized by a loan agreement. Essentially, the investor who gives you the loan is the lender.

Business share

The size of the share must be calculated in terms of potential profitability. It should be from 50% per annum, i.e. the investor must return his money in 2 years or less. It is possible that the investor receives a higher percentage before the return of his investment, and then the percentage decreases. For example, at first 30%, and after the return of investments – 15%.

I recommend entering into a partnership with an investor, giving him a share of up to 50% and at least partially investing in the project with your own money to be the owner of the business. A share in a business is formalized by the creation of an LLC with the corresponding shares of the founders, or an investment agreement. And most importantly: if you go according to the option of a share in the business, in no case take on the obligation to return the money.

Finally a story

At a franchise show in Paris, we met a guy named Dzhambulat. A simple guy from Ingushetia who owns a burger in the center of Paris. I asked him: “Where did an Ingush from a simple family get a burger in Paris?” He replied that he didn’t even have the money for a restaurant, but it was hypothesized that the owners of 200 square meters in the center of Paris also had money to invest in his business. Then he began to visit the owners of premises suitable for a burger, and invite them to become investors. The hypothesis worked. He went around 200 owners of premises, and 1 of them agreed. Lack of money, experience in business and other things can be compensated by the number of attempts.


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