If you took any business classes in college, chances are you learned how to write a business plan. What many colleges fail to teach you is how to actually use that business plan to raise money to start your own business. My professors taught me the “Field of Dreams” approach to finding investors…”If you write it, they will come”. We all know that doesn’t work though, so here are some tips on how to raise money to open that topless coffee shop, start your ChatRoulette website, or make those Snuggies.
The easiest way to find investors is by asking friends and family…but if that was an option then you probably wouldn’t be reading this. A good way to find investor groups is the ACA (Angel Capital Association). They have a directory on their website which shows all of their members by geographical region. Each member has a link allowing you to read more about them…obviously you’ll want to look for members that cater to the area that your business will fall into.
Another good resource for finding investors is LinkedIn. The “Answers” section of LinkedIn has two very useful categories: “Venture Capital and Private Equity” and “Startups and Small Business”. Also, there’s plenty of groups that you’ll want to join for networking purposes…some examples are “Private Equity Investment Group”, “Venture Capital”, “Angel Investors”, “Start-ups and Entrepreneurs Get Funded”, etc. Don’t forget to join your school’s alumni group as well. Make sure to get involved in the discussions in these groups.
Think of your business plan like a résumé. Just as the goal of a résumé is to get a job interview, your business plan is just a tool to get your foot in the door. Once you’ve located a target list of investors, then the fun starts. Some techniques to use to aid your cause:
- Try to develop an advocate within the group that has similar interests or connections. This can be done through a little web research on each group member (ie. LinkedIn, Bios on the Investor Group’s website, or just Googling each name).
- Compile references from potential clients that state they would purchase your product or service at the price it will be offered.
- State your “Unfair Advantage”. Or: why you have a better chance at success than others in the same business. It could be your current network (clients, partners or potential employees), knowledge, experience or talent.
- Focus on “Financial Efficiency”. Even though investors know that most businesses will require more money than originally planned for, they’re typically are attracted to entrepreneurs that really believe that they can do it for less.
With the state of the economy right now, many recent college graduates are starting their own businesses out of despair. While to some this is upsetting, I think this is exactly what is needed to produce a better economy. I compare this to the forest life-cycle, where an old decaying forest must burn down to ignite the life-cycle. Similar to this cycle, the strong businesses survive and the weak ones perish to make way for new startups. We just need to make sure that the tools are in place for the new economy to grow.