How to Get Investors for a Startup in India

As an entrepreneur, it is very important to take steps wisely as there will be involvement of big investments at every stage of the business and accordingly, an entrepreneur has to incorporate his ideas into a pitch. Existing businesses these days are open to new ideas and are willing to provide opportunities to the new entrepreneurs who have the eligibility and capacity of being catalysts in order to change the world of entrepreneurship.

In today's time, investors are not scared to take risks. The rise of startup funding has become a new norm which is breaking news recently with constant announcements of several startups getting funded.  Sometimes, an entrepreneur may feel he or she has missed something. However, in reality, it is necessarily a blessing in disguise. There are a variety of funding options available which can provide a wider and better ground for the new businesses to find means of funding.

In the case of a new entrepreneur, it may take about three to six months to fund his or her company or business. Investors can be of different domains based on their resources, inspiration, and capabilities. An entrepreneur can choose the best investors available depending on the preference and also based on his or her strategy to establish capital requirement and size of the business.

As a founder, a new business owner has to take a call on the level a startup has reached a certain stage in order to look for funding options in the market. However, it is completely dependent on the current business scenario and the results that the entrepreneur wants to accomplish in the upcoming 10 to 12 months.

It is however noted that investors play a dominant role in the process of startup funding. The expertise and involvement of investors is key determinant for the success of a funded venture. Thus, it is important to know several types of investors and choose the right one among them.

The following are some of the details of the investors:

Personal Investors:-

Personal investors are basically investors from their own network which includes friends, family members, relatives, and close acquaintances who initially can provide funding. In this category the funder is generally relevant at the starting stage of the startup, to cover the test costs, experiments on brands, etc. This funding can help a startup for a limited period of time as after some time other resources and factors may be required to be considered in the business.

Apart from that, another aspect to be considered is that the personal investor's onboarding process must involve paperwork. Thus, it is recommended that a startup owner must consult a lawyer before getting the funding and maintain proper documentation of funding received.

Angel Investors:-

Angel investors refer to the investors who are already well known. Basically, Angel Investors are high-net-worth investors who can provide funding in exchange for equity shares in startups. It can be anyone a relative, professional, a friend, or a relative.

Angel investors are also called business angels or angel funders or private investors. They always consider a suitable match in a startup founder and his or her team rather than considering just the profitability of the business. Angel investors can also supplement the support funding with their industry expertise. The potential is immense if the relationship between a startup founder and business angel is the right fit.

Further, Angel investors also provide flexible funding options, irrespective of the fact that the requirement is one-time or continuous. It is advisable to take time seeking a suitable founder who can actually understand the business idea, brand and believes in it.

Venture Capitalists:-

Venture capitalists are the investors who fund startups having long-term growth potential. Venture Capitalists include financial institutions, investment bankers, wealthy funders, etc.  Individual funders who are looking for a boost in their successful businesses can opt for funding options through a venture capitalist. Similar to Angel Investors, Venture Capitalists also provide strategic ideas and help to boost the financing, marketing, and operational decisions.

The venture capital process involves breaking the business equity into the shares ownership which is sold to the investors, creation of limited partnerships independently. Sometimes, said partnerships can be formed with multiple startups in the same business field. In case of a large amount of capital requirement, a venture capitalist is a right choice for an entrepreneur.

Peer-to-Peer Lenders:-

Peer-to-peer lending refers to direct lending of funds where a borrower can connect with investors having funds to invest. Investors in this type of funding are more motivated as compared to other investment options as the rates of interest are higher. Peer-to-peer Lending platforms are approached by the borrowers in case other funding options and financial institutions are not suitable for funding.

Some of the websites that facilitate Peer-to-peer lending are Finzy and Faircent. The process under this type of funding involves an investor biding for the loan requirement of the borrower which is up to the borrower of whether accept or reject the offer.  However, there is a maximum limit on how much funding can be lent under this funding option.

How to approach the investors successfully?

Once an entrepreneur starts his journey to get funding, it may seem to be a lengthy procedure. It is also very likely that there may various investors an entrepreneur may meet but the meeting may not finalize for funding. Thus, it requires confidence, patience, and consistency. The funding process can become smoother and more effective once the agreement for funding falls in place.  The following are some of the steps to win the investors;

Make yourself or your business visible on appropriate platforms:-

 It is required to build a startup brand and ensure that the visibility of the business is high in the market. For this, online marketing and digital marketing is the best option. A digital platform like Angel List is one such example to keep the prospective investors in the loop with products, services, and the market presence of the company. A wisely crafted portfolio and impression will have a high impact and the business can be in the spotlight.

Make a list of the investors you wish to approach:-

Collecting the names of the potential investors is one good idea to get funding. If the focus is only one specific investor with whom an entrepreneur wants to meet and share his or her idea, then it is better to keep that investor on the list. It is good to start approaching seasoned investors. A new founder can also utilize his newly made network of investors whom he or she wants to pitch, however, this will lead the start-up owner to the desired investor. Ultimately, it will not help to find suitable investors with the current requirements but it will provide an understanding of the landscape of the investors for future requirements.

Communication More Often is Required:-

Communication is the key; it needs to be directed towards the investors. In fact, one-to-one conversation especially from a trusted source will never be underestimated. A thorough search on the shared connection has to be made and the next step is to discuss your startup idea with the acquaintance. If needed, meeting them personally is good prior to pitch the business idea to the target investor.

The First Impression Must be Good:-

Pitch must be made in a way that it will be hard on the part of the investor to forget. Making the right kind of impression is very important for the investor. In the case of well-investors who have multiple pitches by their side may not provide a substantial amount of time. Thus, it is important when an email is being sent, the content must be engaging and catches the attention of the investor.

While writing an email, it is good, to begin with, a brief introduction of the business, some hard-hitting statistics, and then a request for a personal meeting. Further, personalization of the email being sent is also required.

Leave the Investor Spellbound:-

The search of finding suitable investors and seeking the appropriate business to invest in, keeps the cycles of the business thriving. If the objectives of the business resonate with the investors and the same presents long-term passion and vision, it will definitely catch the eyes of the correct investor. It is required to foresee the upfront benefits and potential before investing in.

Types of Investors to Avoid:-

As there is a diverse range of investors available, it becomes important to do thorough research on potential investors.  It has to be kept in mind from the perspective of considering the investment in the startup. Research and investigation about all types of investors have to be made and in case there is a specific investor, one must keep in mind the objective of methods that are the right fit.

The task involves absorption of the preferred kind of management style, values, and history of investment. It will be considered as a kind for the establishment of the relationship which can be laid down as a prerequisite of the control that a startup owner wants to maintain. The investors having a track record or litigation must be avoided as it can be a threat and will ruin the reputation of the business and leave the business owner in the conflicts of the courtroom.

Further, the investor's presently complex and lengthy clauses in the contracts must be avoided as most of the clauses can be in the investor's favor.  Also, it is advised to be aware of the fact that who is a decision-maker in the company. Although mentorship is good sometimes it may backfire in long term.