[Andrea De La Cerda]

My business has been going fine – not badly but also not reaching the volume I think it could. I definitely feel ready to scale up to the next level but need a substantial amount of money to do so, and am uncertain about the best way to approach investors.

It would be helpful to know not only how to identify potential investors, but how best to reach out, pitch to them, etc.

[captreeger]

Thanks, Andrea! Glad your business has been going well!

As you know, there are a lot of early stage investors out there. But finding the right one to fit your needs can be essential.

Before doing anything, including raising money, I advise companies to evaluate and articulate who they are and where they’re going with it. So, they would figure out and write down where they are with the business, what they want to accomplish, and how much funding they might need to get there, with a little extra margin of error built in. Most companies do a business plan and/or “pitch deck” presentation articulating these things.

It’s often better not to get investment at all than to get it from the wrong people. And, I’m not an attorney and won’t try to advise on legal considerations that may exist in your state regarding accreditation, representations, documents, and other relevant matters. It would make sense to speak with a qualified attorney before accepting any investment.

For many very early stage ventures, the “seed” investment may come from friends and family members. My caution on this is to be very careful about who you take money from, and how much. Any early stage business investment is inherently risky. So it’s important to make sure any friends and family are well aware that they could lose their investment, before chipping in. And the best investors can often help you. So if you have interest in pursuing this course, it might make sense to discuss with friends or family members that have already been successful and that want to help with your business. You may also want to have a thick skin. Sometimes it’s particularly hard to take guidance and feedback from those closest to us. But if someone that’s well-meaning ever hurts my feelings, I expect they may be giving me great advice!

Another possibility is to find a local angel that fits your needs. There are a lot of groups and angel networks. And while many specialize in technology investments, there are plenty that do “old world” companies, as well. Many of them can be found at https://www.angelcapitalassociation.org or with a quick online search. And ask around. A warm introduction from a credible mutual friend might be the best connection to most angels. It has been suggested that the greatest factor in angel investments is the right introduction. And of course, a good angel could potentially help your business in more ways than just investment.

And of course, there are more advanced sources of funding, in venture capital (VC) and private equity (PE). You could start looking at crunchbase.com or do an internet search. And while many of these funds have national or global reach, it can’t hurt to start looking through any local connections and relationships you may have. Again, many of the best introductions will come through a warm introduction to an investor from a credible mutual friend that can vouch for you.

If you spoke with ten different PEs and VCs , you might find about eight different answers to what they’re looking for. And they all have different models. For example, many PEs want to take controlling interest in your company, while most VCs just want a board level engagement with their investment. But there are some commonalities. As previously noted, it helps a lot if you can clearly explain who you are, what you want the funds for, and where that will get you. But in this case, they may also want a more developed explanation of how they will recoup their investment. And the greater the risk they see, the greater the return they’ll expect to justify an investment.

There’s a lot more to be said about all of this. But hopefully this is a start. If you want to offer more specifics or if you – or anyone else – want to go deeper on any of this, I’ll check back in.

[Author]

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