Investors or financier is a term for people who make investments. Generally, this designation is more directed to individuals or institutions that invest in a company or business, to get returns on their investment activities.
An Investee is a place where investors invest their funds. The investee’s job is to use and process the capital to run the business. The Investee gets a reward which will be returned along with the capital to the investor. So there is a symbiotic mutualism that is mutually beneficial for both parties.
However, what are the types, advantages, and tips for getting investment for your company? Read on to find the answer by reading this article further.
Table of Content
Types of Investors
When reported by Investopedia, an angel investor is a wealthy person who provides financial support to small companies such as startups.
Usually, he will ask for a reward for getting share ownership of the startup. Oftentimes, angel investors are the closest people such as family or even fellow entrepreneurs.
Angel investors are business angels, angel investors, or even noble investors. In general, this type of financier is more focused on helping startups in their development rather than prioritizing the profits that might be obtained.
Although their risks sound very high, the benefits they will get are certainly very tempting.
Also read: 5 Marketing Strategies Every Startup Or Small Business Can Afford!
In contrast to Angel Investors, Venture Capitalists expect rewards from the companies they fund. Venture Capitalists target companies that show high growth potential by asking for an equity stake in return after the company they fund grows big.
The distribution of shares and the company’s development level parameters are mutually agreed upon by the Venture Capitalist and the company.
Generally, VCs get their money from wealthy financiers, investment banks, and other financial institutions. This might be the answer to your question regarding where do VCs get their money from. However, not everything is in the form of money. Sometimes there is also a form of technical expertise or skills.
Also read: The Importance of a Financial Planner to Grow Your Business | Tips & Ways
Advantages of Getting Investments from Private Investors
Can Get to Know Potential Investors Closer
There are several factors that you should not forget in doing business, namely the connection factor. Therefore, an advantage of having a loan from capital investment angel financier is that every prospective investor and prospective businessman can have a closer relationship.
Understanding the Special Interests of Potential Investors
Generally, the borrowing process will be easier if the financier have a certain interest in the type of business they want to build.
For example, the financier may have an interest in a particular themed restaurant business, but does not have the idea or expertise to create the restaurant, so he is more interested in becoming a financier.
Not Burdening with Interest
Generally, private financier will not provide a large interest loan burden, such as loans provided by banks. So, they will not be bothered by additional costs, because of the higher interest rates.
Have More Flexible Requirements
Usually, banks and other financial institutions have quite strict requirements in terms of lending and also payments.
However, private investors can have discussions with prospective borrowers so that they can determine a payment decision that both parties have agreed on. However, it should be underlined that the trust factor is very important in making agreements between private investors and their debtors.
Though the investors give the money to the start-up companies that have potential and good impact, the use of ERP for a startup company or a business that is just starting can be a smart and profitable decision for the company.
Also read: How Does Smart Manufacturing Technology Benefit Industrial Investors
Tips to Attract Investors for Your Company
1. Do research on investors
Find out as much as you can about potential investors. You must understand the type of financier in question and the terms of the cooperation they provide. You can also learn about the investments they have made in other companies or projects before, the interests of the financiers, and their business conditions. By studying it, you can estimate the advantages and disadvantages, the positive and negative sides of the prospective investor that will be useful for the next stage.
2. Know the business plan
Know and understand the ins and outs of your company’s business, both advantages, and disadvantages. Understanding the advantages and disadvantages of a business can make a company better prepared to face the challenges and obstacles while seeking investors. Your company will also compete with other companies. So, you should also understand the unique value and proportions that you can highlight to investors and compare your competitors.
3. See the company’s business from an investor’s point of view
Try to see your company from an investor’s point of view. Will investors be interested in the current condition of your company? This question will anticipate what they want from the company so that you are not awkward when presenting the company to investors. Even if there are deficiencies in your company that you think reduce the interest of them to invest funds, you can design a plan that can minimize these deficiencies.
4. Design a credible business plan
A business plan is very important for companies to attract potential investors. The business plan includes financial projections, an Executive Summary, a Business Model, and the assumptions of the company that could occur. this can help them to understand your company better.
5. Try promotion through social networks
Although there are ‘official’ channels for contacting investors and sending business design proposals, there is no harm in using social networks. Take advantage of the network society that you have by promoting the company’s business to your colleagues. It is possible if your colleagues know those who have great potential and introduce you to working with these investors.
6. Understand how your company gets ROI
Both Angel Investors and Venture Capitalists, both want to know how your company will get a Return on Investment (ROI) or return on investment. The level of ROI is important for investors to be used as a parameter of whether your company is eligible to be funded or not. ROI is still related to Financial Projection. So, design the ROI on the Financial Projection as realistic and attractive as possible to get the lyric from investors.
7. Choose the right investors
It’s important to make sure you find the right investors. Analyze the conditions that investors provide first and don’t be immediately tempted by the funding they offer.
Investors are your partners for a certain period so you will need investors you can work with well and trust and monitor each other.
8. Join an accelerator startup
By joining a business accelerator, you will get guidance and training for the development of your company. Companies that participate in business accelerators have the knowledge and skills to get great profit opportunities.
Investors will finally look at companies that follow business accelerators that are more profitable and attractive than other companies.
9. Asking for advice
You can build good relations first by asking for advice and building relationships with certain parties and getting advice from seniors who have been in the business world. You can understand the weaknesses, opportunities, and potential in your business.
10. Learn from failure
Negotiations don’t always run smoothly. If your negotiations with potential financiers have not resulted in an agreement, analyze why the failure could have occurred. Their response to your statement can give you an idea of what they do well and what led to the rejection.
To facilitate your communication with them while negotiating, consider using automated systems in your supplier management. A well-automated system provides you with various conveniences such as an online ordering portal, complete supplier data storage, and many more.
Also read: Business Proposal Creation, Back to Basics!
That is information related to the types of investors, advantages, and tips for getting investors. Not only that, other things that are no less important to attracting the attention of investors are from your company’s financial statements because from the financial statements it can be seen that you are serious about running the business. Not a few company owners underestimate this, even rarely do financial records properly and correctly.
In fact, in the business, financial statements are a reflection of the financial health of the company’s business. Well, to facilitate your work, especially in recording transactions, assessing assets, doing tax reporting to making financial reports, make sure you use the business Accounting System best to suit your business needs. With the HashMicro system, you can customize the software according to your company’s needs. Companies of all sizes can use this software, both large and small.Download Accounting Software Pricing Scheme