Starting a business in many cases requires a significant investment. The appropriate capital can play a decisive role in the timely launch of a startup to a promising market, improving its recognition in the segment, expanding its geography, and modernizing production. Where to really find an investor? How to build a trusting relationship with him?
What is the purpose of looking for an investor?
Before wondering where to find investors, you need to decide on what, in fact, for what purpose the search for partners should be carried out. As a rule, the owner of a commercial enterprise solves this problem. He needs the assistance of an investor because of the insufficient amount of funds in his personal possession in order to fully implement a business project. An investor may also be interested in providing the necessary amount of financing - in order to subsequently benefit from the growth of the company's turnover.
What are the mechanisms for building investor relations?
Also, before thinking about where to find investors, an entrepreneur needs to decide on the desirable mechanisms for building relationships with a partner. There may be several.
Firstly, the relationship of an entrepreneur with a partner who is willing to provide financing can be a direct investment. This mechanism involves the provision of funds to the company in exchange for the participation of a partner in the direct management of the organization, in determining the business development strategy.
Secondly, financing can be attracted on the basis of portfolio investment. This mechanism assumes that the partner, investing money in business development, simultaneously acquires a share in the ownership of the company. In the first case, the investor's benefit is to participate in the management of a potentially large enterprise and become an influential participant in the business community. In the second, the partner, in the case of the growth of the company, gets the opportunity to significantly increase its capital.
What are the investors
Another nuance that an entrepreneur needs to study before deciding on where to find investors is to consider the specifics of the activities of partners who are ready to invest in other businesses. The subjects that become participants in the relevant legal relations may be represented by: private individuals, organizations. Both of them, in turn, are classified into venture investors and those who are ready to invest in fundamental projects. Investors can also be Russian and foreign.
Another criterion for the classification of entities involved in legal relations with businesses regarding financing is the degree of state participation. There are government agencies - most often funds that assist businesses in attracting financial resources or providing them. There are completely private companies.
Crowdfunding
There is a special category of legal relations in the field of investment - crowdfunding. This term corresponds to the mechanism of attracting business financial resources from a large number of people - individual social groups or representing society as a whole. As a rule, investors providing funds to entrepreneurs as part of crowdfunding do not impose any obligations on them in terms of exchanging for a share in the business or participating in the management of the company. This feature determines the great popularity of the relevant legal relations. Many entrepreneurs, thinking about where to find investors, primarily turn to crowdfunding.
What might interest an investor?
Now consider a number of practical nuances that characterize the relationship between entrepreneurs and partners in terms of financing a business. So, before thinking about where to find an investor for a project, you should pay attention to such an aspect as the attractiveness of a business project - those indicators that a potential partner will pay attention to when making decisions about investing money in a company. Which ones?
First of all, this is the presence of a sufficiently large market for the sale of goods and services that the company produces. The second indicator is the dynamics of the industry. The investor is interested in the fact that the product manufactured by the company is in demand in the market for a long time. If the dynamics of development of the industry in which the company operates is high enough, then the partner must make sure that the entrepreneur can ensure the timely release of goods that is not inferior to the products of competing enterprises.
Actually, the level of competition is also an important indicator for the investor. At the same time, for some partners it may be preferable to high, but for others - low. In the first case, the investor and the entrepreneur can take advantage of the presence of a sufficiently stable demand for the manufactured goods and counteract the competition due to the higher quality or lower price of the products supplied to the market. Low competition is attractive in terms of profitability of the company. Of course, provided that there is a demand for goods manufactured by the company.
Another important criterion for an investor to make a positive decision regarding project financing is the soundness of the business plan. The market may have the most favorable conditions, there may be an optimal level of demand and competition, however, if the entrepreneur does not provide a plan, according to which the company will use these advantages, the investor may question the prospects for financing the company.
The next factor that a partner makes a positive decision on the project is the competence of the team with which the business owner works. Or his personal. The market situation may be optimal, the business plan may be worked out in detail, but the implementation will not be at the highest level because it will be carried out by untrained people.
These are the main factors that an entrepreneur should consider before thinking about where to find an investor for a project. If he successfully solved this problem, we can proceed to consider specific mechanisms for finding a partner. Where to find an investor for a startup of a medium or large enterprise in Russia?
How to find an investor for a startup?
Let's start with the specifics of finding partners for the founder of a startup. The main value of the appropriate type of business is a promising idea. As a rule, it is characterized by originality, dissimilarity with most other concepts. Another significant criterion for assessing the prospects of a startup is the lack of existing businesses in the corresponding segment throughout the country or a particular region.
It happens that an entrepreneur who solves the problem of where to find an investor in Moscow still decides to switch to one of the markets in the constituent entities of the Russian Federation, since competitors can already operate in the Russian capital. While in the regions, similar businesses will not be too developed or even absent as business entities.
Above, we examined the main mechanisms for attracting investment. If the question is where to find an investor for a startup, then the optimal schemes in this case would be: attracting venture capital investments, crowdfunding. The advantage of both mechanisms is the absence of great risks for the entrepreneur. However, in the case of venture projects, the business owner in most cases has to give up a share in the ownership of the company - this type of financing is classified as portfolio investment. However, the partner in this case, as a rule, assumes the bulk of the costs necessary for the implementation of the project. The advantages of crowdfunding are also obvious - it is an opportunity to attract a large amount of funds in the absence of obligations in most cases to investors.
Where can I find an investor who is ready to invest in a startup within the framework of a particular scheme?
If we talk about venture projects, then there are a large number of specialized funds that are actively involved in the relevant legal relations. They are both in the Russian Federation and abroad, and are represented by both state and private structures. Sometimes it’s enough just to find a suitable venture project or venture fund, and then get acquainted with the proposals of the respective companies regarding the prospects of partnership with private organizations.
How to find investors and where to look for them when it comes to crowdfunding? This legal relationship format is almost completely online. There are a number of the largest - both Russian and foreign - crowdfunding platforms. Using them is quite simple, but it is important to draw up a competent description of the business project, tell potential investors about its advantages.
How to look for an investor for a small business?
Now consider where to find an investor for a small business. This format of the enterprise’s activity assumes that the company is not a startup, but an already functioning business with more or less acceptable turnovers. In this case, investments are sought in order to expand or modernize production, conduct a large-scale marketing campaign in order to increase brand awareness in the region, country or abroad. As a rule, small businesses are financed with the participation of investors who specialize in building fundamental partnerships with private firms.
Venture capital investments allow a scenario in which the partner, in principle, will not be able to return their own investments, as the business will be unprofitable. In turn, the fundamental partnership assumes that the investor will be able to at least ensure zero profitability of his investments, and in the future - significantly increase capital due to the growth of the enterprise.
Where to find an investor for a small business? Such tasks, as a rule, are solved during personal meetings of entrepreneurs and potential partners, who are ready to invest money in the development of the company. They can be held as part of specialized events - business conferences, round tables, and presentations. Communication between the entrepreneur and the investor is also possible in an informal setting, for example, at a corporate party to which they were invited. Fundamental investment is a common type of activity among financial funds. Information about them can also be found in search engines.
How to find an investor for a medium or large enterprise?
Where can I find an investor for a business representing a medium or large enterprise? It is noteworthy that a large-scale established company, at least classified as medium-sized business, as a rule, is itself a welcome investment target for an experienced financier, since it is an operating profitable business. Therefore, it is possible that looking for a partner who is ready to invest money in the company may not be necessary if it meets the criteria of a large enterprise.
However, another question may well be relevant - where to find a private investor who would be a reliable partner, ready to build a constructive dialogue on business development issues. It is allowed, as a rule, in non-public ways - through communication with large financiers through private channels. But in some cases, it is realistic to find an investor at major events, especially when it comes, for example, to international exhibitions. The prospects for building relationships with partners largely depend on the business sphere.
So, the solution to the question "where to find an investor for construction" may differ significantly from such a task as finding a partner in the field of information technology. The construction business and IT are areas with different profitability and development dynamics. Each of them requires special investor competencies in assessing the prospects of investing in a particular company. But, of course, there are financiers who are equally well versed in both construction and information technology. Thus, the investment search strategy largely depends on the size of the company, as well as on the economic sector in which the company is represented. For start-ups, one approach will be more justified, and for small businesses, medium and large firms, different strategies.
It will also be useful to consider a number of recommendations for entrepreneurs who decide to find an investor, as well as establish trusting relationships with him. We will study those strategies that can be described as universal, sufficiently suitable for a business of any scale - a startup, a small, medium, or large enterprise.
How to find an investor and establish a relationship with him: recommendations
Actually, it is useful to search for an investor in those social environments in which people who engage in activities close to the profile of the company communicate. Where to find a private investor for construction is not a problem, it can be very difficult to establish interaction with a person who might be interested in the sales area. Effective investment is largely the result of high competence, most often achieved within the narrow specialization of the financier.
Investment experts advise company owners to first tell potential partners about what other sources of financing are supposed to be used, and what their actual availability is. This approach will allow the investor to understand his own role in relations with business and evaluate his willingness to comply with it. So, if the company also uses credit funds, then its owner can make it clear to the partner that he can count on a smaller share in the business than if the investor financed the project alone.
Another important nuance is the discussion of the conditions for changing the initially reached agreements. It may turn out that in the course of development the project will begin to show more or less profitability (or dynamics of return on investment) than expected by the business owner or investor, as a result of which it may be preferable for them to change the procedure for their own participation in the company.
The entrepreneur should discuss with the partner the reporting procedure for certain business operations, its composition. Some investors require the preparation of only accounting records of the appropriate type, while others prefer to receive management accounts as well . It’s useful to clarify these nuances at the earliest stages of a partnership.
Thus, it is important not only where to find a business investor, but also how to establish long-term partnerships with him. A high level of competence in entrepreneurship is always appreciated. Therefore, an investor will be interested in building an effective partnership. You need to be able to listen to him and take into account the interests expressed by him.
Summary
So, we examined the question of where to find a real private investor. Its successful resolution depends on the scope of the company, its scope, the level of competence of the entrepreneur and the specialists he attracts. An important role is played by other conditions for financing the company, as well as the willingness of its owner, if necessary, to review the agreements reached with the investor in order to build long-term partnerships.