A Comprehensive Guide on How to Find Investors for Your Startup

When a great idea comes to mind, stakeholders want to breathe life into it as fast as possible. To keep your startup afloat you should find investors and do it wisely. Statistics show that 20% of startups are launched but only 3% of them get to the fifth year of their existence. And lack of funding is the main reason for this.

Search for investors

Bear in mind that fundraising for startups consists of so-called rounds which are phases in fact. The first round is known as seed capital. Put simply, it’s the amount of money you have before addressing investors with the intention to get more. It can be your own or borrowed money. Series A implies a meeting with investors to show them the project and get some money. Series B can be reached only in case your project demonstrated significant results. The next series demands another chain of significant results. There are several types of fundraising and investors you can count on.

Angel investor

It’s a person who invests money into your idea. Usually for ownership equity or profit guarantees. Angel investors are a good choice for series A. You can find Angel investors on different conferences dedicated to the industry your product is focused on. Besides, there are a variety of platforms on the internet which help startuppers find the investor and vice versa.

Venture Capital

This financing form implies getting money from an investment fund. This is the establishment which disposes of money entrusted it by a group of people or companies. In turn, a venture capitalist manages this money and makes investments. The best way to find a venture capitalist who may invest money in your company is to be introduced to one of them by another person. You have little chance to get a personal meeting by contacting his/her directly.

Business incubator

This is the establishment that helps young startups launch and finds fundings. As a rule, they provide seed capital and teach you by organizing lectures, meetings and so on. Y Combinator is probably one of the most famous business incubators. The company raised over 800 startups including such giants as Airbnb and Dropbox. Two times a year Y Combinator invests $120,000 in the most interesting companies chosen by them.

Crowdfunding

If you want to break free from investors’ requirements -- you can ask ordinary users for money. There are a variety of platforms which allow to create and launch crowdfunding campaigns of your own and raise money without any reward from your side.

ICO

It’s a new type of investment which has many things in common with IPO. However, instead of stocks, you create tokens or coins (depending on your goals).

Things to do before meeting with investors

A fiery speech may impress your friends and relatives, not investors. If you want to get funded, you have to show investors your project is worth their money. To do so, you should be ready with a prototype as well as Pitch Deck.

Prototype

Investors appreciate an opportunity to interact with the product and test it on their own. Not just hear about it. That’s why you should develop an MVP version of your software solution. If you don’t have a team for this purpose, you may hire a mobile app development company. Many startups do so. Some of them even hire outsourcing companies for the full product development as it’s a much cheaper option than developing, let’s say, in the US. If you can’t provide investors with the MVP or prototype for some reasons, you should at least show them the design of your product.

Pitch Deck

It’s a simple presentation that was created with the help of Powerpoint or other software and specially for investors. Remember, that your presentation should be comprehensive and consist of research details, numbers etc. It’s also a good idea to protect your idea. Put a phrase ‘All Rights Reserved’ and 'Confidential and Proprietary. Copyright (c) by [Your company’s name]' on the first slide of the presentation.

Mistakes that can kill your startup

Even in case you’ve done every step described above perfectly, investors can refuse to give you money. There are several possible reasons why they made such a decision.

1. Investors don’t like obscure ideas. That’s one of the reasons they may reject financing your project. You should define and research your market as precisely as possible.
2. The product should be unique. At least in some aspects. Copies are the second thing investors don’t like. Most of them strongly believe that copied product will never become a great one. And that’s a true statement.
3. Your idea should be flexible. The market evolves all the time and investors understand it as no one else. They may refuse in funding if they are not completely sure the project you are working on can adapt to the future needs of users. To solve this issue, try to talk with your target audience and ask what they think about your idea.
4. Unprofessional developers lead to troubles at all levels of product creation. That’s why think twice before hiring a team of freelancers instead of experienced developers. We don’t say all freelancers are bad workers. It’s just much harder to find the good ones. IT service vendors have their own approaches to selection of staff, while freelance platforms don’t give you much useful information that allows making sure this person is a real professional.
5. It may sound strange a bit but many investors notice that startups founded by one person succeed relatively rarely. The point is, investors may think that you are a private person and don’t want to share your idea with no one else. This raises doubts as can affect negatively on further cooperation between the idea owner and investors.

As you see, the process of getting funded can be tiresome and even hard. However, the future of successfully funded startup is exciting.