Attracting investments in business projects. How to find an investor? Practical tips for attracting investment in your business
According to psychologists, people are divided into two types: an employee, whose confession is to follow the instructions of employers, and an entrepreneur, who is able to organize his own business. But not all entrepreneurial people have enough funds to start their own business. Therefore, the question often arises: how to find an investor for a business, and experts and the experience of businessmen who managed to find capital to start or develop an already operating enterprise will help answer it.
The purpose of attracting investments
The best option for promoting your own business is to attract your own savings, an interest-free loan from relatives or good friends. But often we are talking about serious injections, so the question arises of where to find an investor. Investing is a financial investment aimed at the implementation of business projects that involve a delay in making a profit.
Most often, financiers plan to receive material rewards, or part of a promising business, although gratuitous sponsorship often occurs. Recipients need money for the following purposes:
- implementation of a promising business idea (startup);
- development and increase in the assets of a working enterprise;
- introduction of innovative technologies;
- development of new business horizons.
Modern business does not involve immediate profit, but is designed for the future. Therefore, we have to talk about serious planning for several years ahead. For the most part, capital investors do not do charity work, but they give money in order to receive their part of the profit as soon as possible.
Project investors in Russia are for the most part real professionals who understand modern business processes, so the recipients must convince them of the profitability of the offer and show them advantages over competitors.
Investments at different stages of implementation
There are portfolio proposals, when capital is invested simultaneously in several business projects, and real ones, designed to implement a specific idea. Investors are private and state, including owners of foreign capital, but the idea proposed for consideration should be sound. At the same time, it is not necessary for the enterprise to already make a profit, although the source of investment depends on the stage of development. Consider the main stages of a business project that requires financial investments.
At the planning stage
Particular difficulties arise for novice businessmen who offer a start-up at the planning stage. This means that there is still nothing but the idea itself, so the question of where to find an investor for a business from scratch is especially acute. When it comes to a completely new product or risky event, you can take advantage of venture capital investment offers, help from relatives and private sponsors. Sometimes government programs come to the rescue, designed to support interesting innovative products.
Project started
For an idea that has already begun to work, a team has been formed, but the first profit has not yet been received, money for “promotion” can be provided by venture funds that promote risky projects and dubious startups. Foreign sponsors and private traders will also help the start-up company.
The subject received the first profit
If a business project has already given certain results in the form of a stable profit, investment funds can join the process. Venture funds will not refuse to invest, banks will also consider the issue of participation in the promotion of a working enterprise.
Business is well established and profitable
Banking institutions, IFs and VFs will gladly finance business projects that have already shown themselves to be promising. Foreign sponsors will not refuse all possible assistance, as the risks in this case are minimized.
Investments are needed for the development of a working project
If the question is about a well-established business that shows excellent results, finding an investor directly for free is quite simple. Moreover, financiers will fight for the right to invest in an already operating enterprise. Entrepreneurs themselves can already announce the sale of shares. In addition to private traders, state-owned companies and organizations, including the Pension Fund of the Russian Federation, can take part in the investment.
Where to look for money for startups
You can look for a sponsor at any stage of development, if the idea being promoted has prospects. Each financier, investing money in a new business, risks, so he must have a clear idea of the prospects and the expected profit. There are several options for finding investors for business.
Business incubator
Young entrepreneurs often use the services of business incubators. These are organizations that specialize in the "promotion" of novice businessmen who do not have the funds to implement a startup. Business start-ups can count on a paid office, postal and secretarial services, specialist consulting services and assistance in attracting investments. Contributors will also offer advertising support, assistance in holding contests and tenders. There are several similar institutions in Russia, but the best can be considered:
- business incubator of St. Petersburg University ITSMO, sponsoring start-up IT projects;
- a business incubator created at the Russian Academy of National Economy, which financed over 100 start-ups;
- business incubator at the National University "Higher School of Economics" in Moscow, which is distinguished by a large number of programs and the simultaneous promotion of a large number of business projects.
The organization of a business incubator can be done by any businessman or a wealthy person who has free capital to promote start-up entrepreneurs.
There are three options for organizing a business incubator:
- attraction of own savings,
- participation in government programs,
- assistance from pooled funds from several institutions.
Crowdfunding platforms
It is very popular among start-up entrepreneurs, which is a collective sponsorship of the recipient by a group of donors. The funds are sent as humanitarian aid or support to volunteer organizations.
It also assumes the collective participation of investors in the project in order to make a profit. On crowdfunding platforms, political parties and public organizations that require financial injections find sources of funding.
Venture funds
The text mentioned participation in investment projects of venture funds. "Venture" in translation from English means "risky enterprise". This means that VFs are engaged in financing risky business projects, and innovative technologies and manufacturers of goods that have no analogues on the market have great chances. In the case of promotion, investors get a good benefit. Several WFs work stably on the territory of the Russian Federation, but three of the most stable can be distinguished:
- Pre-seed investment fund, created to support business entities. It is mainly engaged in financing innovators whose activities are aimed at the development of science and modern technologies.
- iDealMachine is the 1st startup accelerator in the Russian Federation that mainly supports startups. Investments are made in Internet projects and e-commerce.
- Internet Initiatives Development Fund, created to promote online startups and working business entities.
VFs are classified by source of capital (private, public, public-private, corporate and foreign), by direction of investment, portfolio size, industry focus and geographic coverage. In Russia, 30% of venture funds are state-funded, and about 90% of them are located in the central part of the country.
Investment funds
Investment funds are often used to attract investors to a project. This is another type of collective financing, when the capital is formed at the expense of the participants. IFs receive a fee for the service provided, and all of its participants also receive their share of the profits. In the course of work, the value of assets rises and profits increase. The TOP-3 Russian investment funds created to invest in promising business projects include:
- Finam, which additionally offers brokerage services and money management.
- Teletrade, specializing in investing in Forex.
- BCS Broker, assisting novice entrepreneurs in managing financial flows and offering the services of a personal adviser.
Investments in IF are popular today, but you cannot make a mistake when choosing it. First of all, you need to know how long the company has been operating, what discounts and benefits it offers to shareholders. It is worth analyzing the level of profitability and the minimum funds for financing, you should also take an interest in the conditions for the exchange and sale of the share.
Private investors
Private investors risk their own funds, therefore they claim a part of the profits. Private traders come to the rescue if the idea is at an early stage, and getting state and bank financing is problematic. Unlike financial institutions, the activity of private financiers is not regulated, and the interest on the loan is high, moreover, it is not uncommon for capital to be issued against the security of real and movable property.
Finding a conscientious person who is ready to lend money is complex and requires a competent approach. In this case, there is a high risk of becoming a victim of “black investors” offering to become a participant in one of the many fraudulent schemes. You can protect yourself by attracting special sites.
The most popular of them in Russia are Vdolg.ru, Zaymigo, Fingooroo, Credbury and others. Their organizers are responsible for the verification of capital investors and take an active part in the execution of contracts, reducing the risks of borrowers.
Public events
You can also look for a sponsor for your own business by taking part in social events. Professional financiers constantly attend thematic forums, exhibitions, seminars, trainings and conferences, where useful contacts are made. There is a chance for visitors to specialized forums, presented on the Web in a wide variety.
How to write an investment proposal
The key to finding an investor for a startup is a properly drafted investment proposal. This is a document that allows you to assess the prospects, and it is compiled on the basis of a detailed business plan, which is a detailed description and implementation methods. When making a proposal, you must:
- describe in detail the essence of a startup;
- make an estimate;
- indicate the market share and current revenue;
- make an offer for the investor's share.
The investor will be interested in the detailed described factors that allow achieving the set goals. To receive money, it is also necessary to think over and convey to him the ways of selling the product / service, the data of companies and entrepreneurs who are planned to be involved as intermediaries. The financier should also be aware of the estimated costs of organizing an advertising campaign and the results of a study of the demand for the promoted product.
What points should be considered when looking for a source of financing
Having decided on a platform for receiving investments, and there are more opportunities for this than it seems, it is necessary to choose the right investor. To get the missing amount, you need to go through several stages:
- prepare a presentation for the investor;
- make the right choice of a depositor, the reliability of which is beyond doubt;
- to form and convey correctly a proposal in which profitability should be justified and advantages over competitors should be highlighted;
- in case of interest, it is necessary to carefully prepare for a personal meeting, but one must be prepared for the fact that during the negotiations the recipient will be asked many leading questions that will have to be answered confidently.
The agreements reached should be documented in the form of a letter of commitment, which forms the basis of a future cooperation agreement. The borrower can count on material support only after the conclusion of such an agreement.
Conclusion
Thus, before looking for a source of financing, it is important to take into account the stage of operation of the business, the availability of own savings and the missing amount. To speed up the search process, it is also necessary to find additional factors that can improve investment attractiveness.
Based on the analysis of the situation, a site is selected, which is preceded by the preparation of a business plan and an investment proposal. Relatives, private sponsors, venture and investment funds, crowdfunding platforms and business incubators become sources of business financing. It is necessary to consolidate oral agreements with capital investors by concluding an agreement.
Large-scale plans require investment cash injections. What does it take to get an investment in a business? Where to look for investors and how to attract them?
You will learn:
- Why invest in business.
- What types of investments exist.
- How to write a business plan for an investor.
- How to attract a private investor.
For every startup there is a necessary condition, without which nothing will come of it. This is start-up capital. To get the right amount of money, you can limit yourself only on your own. For example, sell everything you have, or save for a long time. However, there is an easier way to find money - investing in a business. But how to get them and where can you find investors?
Why you need to invest in a business
Every business needs money to grow. Otherwise, you will be stuck in a dead end without even having time to start active actions. It often happens that a good idea “burns out” even during planning, as everything rests on the lack of funds.
You must always remember that there are many other people in the world besides you who can come up with a similar idea. Therefore, do not hesitate to implement it. Most likely, you will be ahead of competitors who managed to find investments in a similar project, while you were trying to earn money on your own.
Statistically, most large companies started from scratch with almost no start-up capital and used investments and loans.
Nowadays, finding investments in a business project has become much easier. For this, various investment funds are specially created to help novice businessmen.
However, you need to understand that not everyone will be able to receive money from the funds. You should try to convince investors that your project is better than others, describe all its advantages and prospects, and be sure to prepare a business plan to attract investment.
Many investors have no problem identifying exactly those projects that will become the most profitable. They do this based on their experience.
Ultimately, you will not be able to get money from investors if you do not first convince them that your project will bring good and fast profits. There is also the possibility of obtaining a grant, but this method is complex and has a high level of competition.
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Why this happens, Dmitry told the editors of the Commercial Director magazine.
Types of business investments
All investments have the same essence, but they are classified into several types, about each of which it is necessary to know basic information.
The classification is based on certain featured:
- Depending on ownership:
- Investment in own business
Investors consider this variety as one of the best. If the investor is experienced, has start-up capital and all the knowledge, then if he wants, he can start his own business by investing his money in it.
The main advantages of this type of investment are:
- Self-realization and achievement of goals.
- Huge profit.
However, it is not without drawbacks:
- You take a big risk, because business is sometimes unpredictable.
- You must have basic business skills.
- In addition to money, you will spend a lot of time and effort.
- Pretty substantial initial investment.
- Investment in someone else's business
This method is much easier to implement. All you have to do is put in the money, and the people in the know will take care of how to make it work. All organizational issues will also not lie with you.
- Depending on the amount of investments:
- Full funding of activities. The bottom line is that there is only one investor. Most often you can meet in creating your own business.
- Partial funding. This is the so-called equity participation, and the money of investors makes up the bulk of the capital.
- Depending on the stage of investment:
- Investing in startups. This type of investment lies in the fact that money is invested directly in the idea itself in order to bring it to life.
- Investment in an existing business.
Sometimes existing projects need additional funds in order to develop further. In this case, the company already has customers, a certain area of activity that makes a profit.
- Depending on the form of profit received:
- Active income - in this case, the investor is the head of the company.
- Passive income - in this case, the manager is a hired third party.
- By type:
- Direct - money is invested directly in the assets of a particular firm.
- Portfolio - all the investor's funds are distributed among the assets of various companies.
Expert opinion
Direct investment is a risky investment involving business
Ivan Rodionov,
Director of AIG-Brunswick Millennium Fund Direct Investment Fund, Moscow
Many young but rapidly growing companies often find themselves in a situation where they need to raise capital significantly. Therefore, they have two options: grow at a pace that allows their current income, or attract direct investment in business development. Direct investments are investments with high risks and a direct contribution of funds to the company's capital. In this case, the direct investor will be involved in the affairs of this firm as a partner with their own interests. In indirect investments, the objects of capital investment are chosen by third parties, and not the owner of the capital himself.
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Who is ready to invest in a small business
There are several types of funding. So how do you determine which source to go to? It depends on several factors: the stage of business development, its condition, type of activity (service sector or manufacturing sector).
- Friends and acquaintances.
Close friends, acquaintances or relatives may be passionate and interested in even a simple outline of your future business. Only good friends will invest in your project, guided by one faith in you. Using this method, you run the risk of ruining relationships with those people who have invested in you. For example, if your project fails, then you will be required to return the money, which you will not be able to carry out in the near future, and if you succeed, then someone will not like the interest that you paid them.
- Investment funds.
These are associations of various legal entities and individuals, which are connected by the main goal - to receive money.
There are a huge number of varieties of investment funds, which are determined by the scope of their investments. However, they all have one feature: they only invest in time-tested business areas and do not cooperate with innovative projects.
- Banks.
The most popular and easiest way to find money is to go to the bank. However, this method has two big disadvantages. The first is a pledge. Moreover, the loan that you take cannot exceed 70% of the value of the collateral. The second is interest, which not everyone will be able to pay.
- venture organizations.
The capital of such organizations consists of investments of individuals. They often invest in the development of innovative and science-intensive technologies and industries.
The nuances of this method:
- Big risk, but big profit if successful.
- You receive investments for a reason, but you sell a share in the enterprise, which can be redeemed if desired.
- The investor has every right to interfere in the business implementation process.
- Business angels.
This term refers to investors who invest their money in a company that is only at the idea stage. Therefore, if your project has not reached the level at which it is too early to apply to various funds or a bank, then you can use the services of business angels. In most cases, “angels” are people who have already managed to raise their own business and earn good money from it, which they are going to start-up entrepreneurs.
Initially, the "angels" appeared in Silicon Valley, so one of the most popular areas for investment is the technology industry.
Advantages of this type of investment:
- You do not need to leave a deposit and look for guarantors.
- Investors are eager to invest in small business creation.
- The investor in this case is an experienced entrepreneur, which means that he can give you advice and help with development.
- It is much easier for an investor-businessman to understand the essence of your idea.
- Business incubators.
These are organizations that help novice businessmen realize their project, while greatly reducing their costs. Most often they are located on empty places of industrial facilities.
If you want to get into a business incubator, you must apply. In the future, it will be considered by the administration. If the application passes, you will receive a substantial starting bonus.
Benefits of business incubators:
- When renting space and equipment for organizing production, you receive benefits for five years.
- If you need help with finding an investor and doing business, then you will be consulted for free.
- The scope of your activity does not affect the consideration of the application.
- State.
The state promotes the idea of creating private companies, therefore it is engaged in
Sources of investment in your business project:
- Territorial (city, region) funds that support private business.
- Corporations that combine regional investments with private investors.
There are a large number of various grants and subsidies from the state.
A big advantage is that now there are a lot of different technology parks and technopolises, as well as special economic zones.
Despite the fact that obtaining public investment in business projects is not a particularly effective and time-consuming way, we should not forget about it. Yes, you will have to collect documents, communicate with officials and, quite possibly, face frequent refusals. However, if you find an experienced consultant or you have acquaintances through whom you can get through, then you will get good funding without any problems.
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Attracting Business Investment: Five Essential Steps
To search for investors faster and more efficiently, it is important to act consistently and in accordance with the recommendations developed by professionals.
When making investments, investors are primarily guided by their own commercial interests. It is important to understand this, and therefore, in the process of searching for sources of investment, it is necessary to take into account the interests of the owner of financial resources.
Potential investors are concerned about the safety and growth of their financial capital, so they are not interested in how much profit the business will bring to its owner and how breakthrough and innovative it will be.
Some investors do not care about business ideas, they are looking for passive income, tired of active business development. Such investors have accumulated initial capital, which they got with great difficulty, and the only desire of such investors is to make a profit from the invested funds without much labor.
When looking for an investor, you need to convince him that he will receive the desired income. The instruction below is essential. Its step-by-step observance will help increase the chances of a quick and high-quality search for the necessary funds.
To get an investment in a business from scratch, you need to go through five consecutive steps:
Step 1. We draw up a business plan to attract investment
First of all, when choosing an object for investment, investors pay attention to the business plan. It should be correctly drawn up and executed, otherwise there is a possibility of not receiving funds.
A well-written business plan must contain the following information:
- project description;
- calculation of the required amount of money;
- analysis of the commercial benefits that the investor will receive;
- payback period of the project: after what period of time the first income will be received;
- what are the prospects for further development of the organization.
When drawing up a business plan, professionals recommend paying attention to every little thing.
Literally everything should inspire confidence in a person reading a business plan: the quality of the paper on which the document is written, the appearance of the folder in which it is enclosed, even the use of professional graphic editors in the design.
In more detail, how to write a business plan, we will tell further.
Step 2. Choose the right form of cooperation
Cooperation between a business owner and an investor takes many forms. It is important to analyze in advance which of them will be most effective for a company that is looking for investments.
Investors agree to provide funds by earning income in the following ways:
- as a percentage of the invested amount;
- as a percentage of profits throughout the life of the project;
- as a share in the business.
The business owner, having previously decided on the option, must indicate it in the business plan. Nevertheless, it often happens that it is difficult for a novice businessman to find the necessary investments.
If a potential investor categorically disagrees with the provided model and wants to use another option for cooperation, this option should be evaluated. As practice shows, it is better to agree to its terms than to remain without funds.
Step 3. We resort to the help of experienced businessmen
Novice entrepreneurs can be sure that no one will understand them better than experienced businessmen who have been successfully working in this field for a long time. Most of them willingly help beginners with advice. Especially when these councils acquire a mutually beneficial form of cooperation.
Often experienced businessmen take beginners under their wing: they can give investments for a business project to novice entrepreneurs or recommend a project for investment to other businessmen. Even if this does not happen, it is quite possible that professionals will provide valuable advice and guidance that will help in the future.
Step 4. Negotiate
Very often, a positive decision of investors to invest in a project is determined by competent negotiations. You should carefully prepare for them, even if you easily find a common language with people and have good public speaking skills.
It is necessary to correctly answer the questions that a potential investor has and convince him of the prospects of the project. It would be wiser to think over all the topics for conversation in advance and prepare clearly formulated answers.
From the first meeting, investors usually expect a competent presentation of the project, as well as a business plan.
The invitation of a specialist who participated in the development of the project can also contribute to the successful conduct of negotiations. It will help to cover all its nuances more thoroughly and better and answer the most tricky questions of investors.
Step 5. We conclude an agreement
The last stage of negotiations in case of a positive result is the signing of an agreement on cooperation or investment. It is important to carefully read all the terms of the contract. Even better, if there is a professional lawyer nearby.
The agreement must state:
- term of cooperation;
- the amount of investments;
- rights, as well as obligations that are assigned to the parties.
The funds are transferred to the businessman on certain conditions, in accordance with the agreement. Their essence is that finances should be invested in the implementation of the project.
The signed agreement should exclude the possibility of misuse of funds. Even part of the invested money should not be spent on needs that are not related to the implementation of the project.
The entrepreneur should be guided by the step-by-step recommendation described above. In attracting funds from investors, it is important to follow the sequence, only in this case the investment will be as effective as possible.
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Expert opinion
You are a seller and an investor is a picky buyer
Anatoly Saklakov,
President of the Kaskad group of companies, Perm
During the first meeting, the investor expects to hear from you an oral story about the investment project and the company. The presentation should be energetic and concise. When you represent your team, the contributor evaluates you as an individual, as an entrepreneur. Activity, honesty, ability to achieve results, intelligence, your leadership qualities are the most valuable personality traits for investors. The stronger these traits are manifested in you, the higher the chances of establishing cooperation between you and investors.
Light humor and optimism will be a good help for you, learn to always set yourself up for a positive wave. Contrary to popular belief, most investors do not like professional presentations with slides, it is better to use diagrams, drawings on paper instead. The best option would be to provide investors with photographs of manufactured products.
How to write a business plan for investment
The business plan for the investor is economic and technical justification for the need for capital investment. It is mandatory to provide for an analysis of the effectiveness of a set of measures, an assessment of the reality and necessity of investments, and the solution of problems that will arise during the implementation of the project. A business plan is a logical and structured justification for the need and expediency of injecting investor funds into a particular business.
At the enterprise level, relatively small (local) projects are used more often. The business plan in this case acts as a document representing the results of a complete investment project.
Thus, a business plan can be included in the investment package as an integral part, replace it, or include several projects.
The business plan of the investment project is being developed to substantiate:
- degree of viability and sustainability of the project;
- the possibility of obtaining investment and credit resources, as well as the return of borrowed funds;
- proposals for the creation of joint and foreign enterprises;
- expediency of providing state support measures;
- direction in which the project should develop.
The business plan of the project for attracting investments provides for an accurate, competent and structured presentation of all the material that would characterize the business model offered to investors from all sides. The content of the text in the business plan should be light with clear and reliable information for contributors.
An important condition is logical structure the whole plan.
When drawing up a plan, the following principles should be followed:
- Information must be true and accurate.
- The wording should be short and correct so that there is no misunderstanding.
- Calculations and arguments are needed to explain each stage of the development of the project.
- No need to use redundant information.
- It is not necessary to describe only the advantages of the project, while not mentioning its shortcomings.
Only a brief, reasoned position, which is enshrined in your project, can attract prospective investors. If your business plan contains incorrect information, a lot of unnecessary details, and complex professional terms, then it will be problematic for you to get investments in your project.
Structure The business plan has two parts. The first is the introduction, in which you briefly describe the essence of your project. The second is the main part, which includes the following subparagraphs:
- General definition and description of the business development plan.
- Information about the provided goods and services. Here the situation of this or that product/service in the common market is subject to consideration. A comparison with competitors and a description of the prospects are made.
- Consideration of the scheme of promotion of your goods or services. We study all the ways to get the maximum income and sell your product to the masses.
- Preparation of production and organization plan. The study of the technical base and the formation of order at the enterprise.
- Discussing how your business plan will be implemented based on the required funding.
- Investment plan.
- Forecasting your company's performance in the future.
- Economic efficiency indicators based on calculations. In other words, you must prove to the future investor that your project is really profitable for investments.
- Consideration of all kinds of risks that may arise during production and sale. Risk assessment.
- Plan of legal activity.
- Information about the author of the business project.
Similarly, project implementation steps for investments within the specified structure are subject to consideration. To put it simply, your business plan should contain not only information about your idea, but also information about its implementation.
It is necessary to consider the implementation of a business project for investment within the business plan of your project, which is official documentation and is carried out taking into account the wishes of your investors.
To determine efficiency business ideas, there is a system of indicators. It includes:
- Financial performance indicator that takes into account all outcome options for each party.
- A budget performance indicator that indicates how the investment will affect the republican or local budget.
- An indicator of efficiency in terms of economics, which takes into account the ratio of costs and results obtained for each of the parties.
In addition, it is necessary to assess how this project will affect society and the environment.
Commercial efficiency is the main indicator for a business, the purpose of which is to strengthen its position in market conditions and maximize profits.
The main indicators for obtaining an objective assessment of a project are:
- payback rate;
- business profitability index;
- net income from doing business;
- internal rates of return.
The ratio of the net profit received and the amount of capital that is invested in the organization of the enterprise determines the value of the size of the investment.
Based on the calculations, investors decide whether it is advisable to invest in the business the amount of money that the entrepreneur requires.
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How to attract private investment in business
Private investment is a guaranteed way to get financing for a business in any economic situation, even in times of crisis. However, one must take into account the fact that now investors do not demand a small block of shares, as before, but vice versa - they need either a blocking or a controlling block of shares. In other words, they become co-owners of your business.
The differences between investment funds and private business investments lie mainly in the amount of capital investment, as well as in the amount of profit that investors want to receive from one or another source.
This means that private investors and funds have different investment targets. Those who are going to engage in small and medium-sized businesses, it would be preferable to turn to private investors.
In this case, you can get a small investment, and most importantly, borrow money, and not sell part of your company's shares.
In most cases, they contact private investors directly using contacts. However, if you are applying for small amounts of money from ten to several hundred thousand US dollars, then you can look for a private investor yourself. There are quite a few offers from private investors, so you need to understand that you have to spend quite a lot of time choosing the best and most profitable.
There are two main conditions without which you will not be able to attract business investment from a private investor:
- Requires accounting in accordance with International Financial Reporting Standards.
Otherwise, you should not count on negotiations with the investor.
- Soft financial modeling.
It is important for an investor to know how the product in which he invests his capital will behave in various market conditions.
Expert opinion
It is more interesting to work with innovative projects
Stefan Gleinzer,
business angel, London
I love investing in business development that has a touch of innovation. I think that it is better to form a portfolio of various successful projects than to invest in the same area. Investing in business projects to create new digital technologies that, quite possibly, will change our world for the better is my choice. I prefer to invest in companies at an early stage of their development. Despite the fact that sometimes I made many mistakes, I will not stop investing in business projects.
Expert opinion
I don't like it when money is kept under the bed
Kirill Shalankin,
private investor, Moscow
The money kept under the bed is not mine. Therefore, I decided to invest them in some project. My condition was equity participation in the project, or representation in it as a co-founder. To choose the right project for me, I spent quite a lot of time. I searched through friends, on various forums and sites on this subject. As a result, my selection process was divided into three stages:
- Acquaintance with the business idea and the entrepreneur.
The description that they provide me must necessarily contain reasoned information, on the basis of which I must choose this particular project, evaluating its prospects, as well as the attached calculations. I am a man of principles, so I will not invest my capital in projects that can harm people. An entrepreneur must explain to me the purpose of his business. Naturally, I pay attention to what impression the partner makes. Changing a business plan is easy; changing a person is almost impossible.
- Business plan discussion.
When discussing a business plan, it is important to think critically in order to calculate all the risks. I ask about what happens if there are problems with the development of the business, and what solutions will be taken to eliminate them. At the end of the conversation, I understand for sure whether the business plan is 100% thought out or not yet.
- Time for reflection.
If I am satisfied with the results that I got in the first two stages, I take two weeks to think about it in order to make a final investment decision. If, after this time, I still have the desire to invest my capital in this project, I will do so.
Who assists in attracting investments in business on the Internet
If you are unable to find an investor for your business on your own, you can turn to specialists who will do it for you.
The most popular Russian-language services for finding business investments and investment objects are:
- EASTWESTGROUP
The essence of this service is to find investments in an existing or frozen business. Thanks to him, you can save a lot of time and effort. To work with this resource, you need to go through a simple registration, after which you can contact investors.
This service has over 10 years of experience. Experts evaluate the prospects, as well as the strengths and weaknesses of a particular business project, absolutely free of charge, which helps to attract investors to it.
After registration, you will immediately be able to contact a large number of investors, which increases the chance of receiving money for your business project. This service takes a small fee for finding a depositor, which is negotiated individually with each entrepreneur after the completion of the transaction. Before you receive the investment, you will not have to pay anything.
To use this service, you need to follow a few simple steps:
- Submit an application.
- Free consultation with a specialist.
- Read the Intermediary Service Agreement.
- To sign an agreement.
- Wait for negotiations between the investor and the service to take place.
- Conclude a mutually beneficial deal with the investor.
- start2up
In fact, this service is a bulletin board. Here, startups, aspiring businessmen and investors place ads to find a partner.
This site helps to invest money for those who have it. And for those who do not have the money to create or develop their own business, he helps to find investments.
Ads are divided into categories based on the field of activity and the region.
The most popular business areas on this site are: “IT” and the Internet, education, art, culture and science, as well as real estate.
Already several thousand people use this service. Moreover, its visitors are not only Russian citizens, but also residents of the CIS countries and Eastern Europe. Thanks to such a vast geography, the chance of getting investments in your business increases.
On the site you can find a huge number of proposals for buying a startup, investing in a start-up business or in the development of existing business projects.
Moreover, you can buy a ready-made business.
Thus, thanks to various Internet portals, you can easily find an investor if your project is interesting enough.
Do not forget that there is such a thing as crowdfunding. Using one of its varieties - crowdinvestment, you can get financing for a share in a project for investors.
- Crowd marketing: why work with negative customer reviews around the clock
Common mistakes businessmen make when investing in a business
Mistake 1.Ignorance of profit
Due to excessive confidence in their idea, some entrepreneurs cannot accurately calculate how much income an investor will receive.
Error 2.Benefits not calculated
First of all, you need to determine how much an investor can earn on your project.
Mistake 3.Asking for more than they need
Mistake 4."I have developed a new product that is not yet on the market"
Many begin the presentation of a business project with these words. But they never thought about the fact that this is not on the market for the simple reason that no one needs it. If you presented your project in this way, then be sure to prove why it will be promising and useful.
Mistake 5.Lack of competitive advantage
It is imperative to have a competitive advantage that others do not have. At the same time, you should not give your business imaginary advantages that, in fact, do not represent any benefit for the project.
Information about experts
Ivan Rodionov, Director of the AIG-Brunswick Millennium Fund Direct Investment Fund, Moscow. Doctor of Economic Sciences. At the same time, he manages the AIG-Interros Russia Century Fund, a direct investment fund. AIG-Brunswick Millennium Fund is an American private equity fund. Founded in 1996. Manages $285 million in capital. At present, the fund has successfully completed all of its investment projects.
Anatoly Saklakov, President of the Kaskad group of companies, Perm. "Cascade". Field of activity: design and construction (KaskadStroy), trade and logistics (Logotrans, UralPromKomplekt, Dilon Finance, Dion Praha), property management (VKIU, URS Kama-flot), health services (Mir Zdraviya ”, Go! Fitness), beer production (“Burma”), retail sales (“Ounce”). Form of organization: group of companies. Territory: Russia; head office in Perm. Number of staff: 120.
Stefan Gleinzer, a German business angel based in London. Participated in the founding of companions.de, companionsTV, ricardo.de and myblog.de, Mendeley.com, RjDj.me, Last.fm. Stefan's investment in Last.fm, valued at several hundred thousand pounds, made him $22 million when Last.fm was sold to CBS. Stefan truly believes in the European spirit of entrepreneurship and remains an active business angel. In addition to his business interests, he received a PhD in foreign exchange risk management and worked as a DJ for 15 years.
Startup is a word on everyone's lips. Entrepreneurs of all stripes strive to launch their own. There are many ideas, there is also enough money in the world, but there is one “but”. Not all ideas can lead to quick profits, and not everyone who has money is ready to part with them easily.
Attracting investment in a startup is one of the most important tasks for beginners and experienced entrepreneurs.
How to attract investment in a startup?
First you need to understand the target audience of your future product or service. Understand which markets you will target. Create a reliable and professional team. Decide what you want to get from cooperation with investors. Calculate the amount of investment you need to be successful. Make a clear and informative presentation of your company, include existing economic indicators. And then take steps to actively seek money.
Individuals, crowdfunding platforms, venture funds, business accelerators and other banking and financial structures can invest in a startup.
Task number 1 is to interest a potential investor. Offer him favorable terms of cooperation. To prove the seriousness of intentions to establish and develop your business, especially if tens and hundreds of thousands of dollars of investments are at stake. And, as a rule, we are talking about just such amounts, since the initial capital is taken from their own savings, or the savings of relatives and friends are attracted.
An experienced investor expects to see the first product samples and sales figures. He expects to receive evidence of a successful launch and a bright outlook.
Trust is the key to an investor's heart and wallet. The more he trusts you, the more willingly he invests money.
What are the conditions for investments?
Most potential investors: business incubators and crowdinvestors are ready to invest in a business on the terms of obtaining a share corresponding to the investment and participating in the company's operating activities. With a positive outcome of the enterprise, this makes it possible to sell a share and make a profit.
With crowdfunding, people can invest money in a startup by pre-ordering products, or they can give you money as a gift.
If we talk about bank loans, it means receiving money at a certain percentage. But lending institutions are very rarely willing to take risks and make such investments, as according to statistics, only 1 in 10 survive.
Ways to attract investment
Finding investments can take a long time. Entrepreneurs should be aiming for a big way and action. Be able to present your idea in the most favorable light and stand out from competitors.
There are several ways to attract investment:
- Participation in industry events;
- Visiting specialized forums and conferences;
- Participation in competitions;
- Placement of the project on various on-line platforms and exchanges;
- Appeals directly to venture funds and business accelerators;
- Search for business angels.
The most famous venture capital funds spending huge capital are located in the USA. Among them are Sequoia Capital, which financed Apple, Benchmark, which invested in eBay, and Founders Fund, which invested in SpaceX and Airbnb.
Former Google employee Chris Sacca is an angel investor. Twitter was his most successful investment. Another "angel" - Jim Breuer is known for investing in Chinese smartphone manufacturer Xiaomi.
Crowdfunding platforms such as Kickstarter and IndieGoGo annually attract billions of dollars of investments and many small investors who are ready to invest completely free of charge in an idea that is interesting or useful to society.
Large multinational companies are interested in high-quality and promising start-ups. They hold competitions where they select the best and finance their work. Often, in this way, companies close their needs for innovation.
Organizers of off-line forums and conferences involve all interested parties. Such events can reach a large number of participants and optimize the search process.
What are the advantages and disadvantages of each method
Before deciding to seek funding, there are a few things to consider:
- Branch of the economy;
- The presence of a team;
- Product readiness;
- The amount of required investment;
- Timing;
- Social component;
These factors can significantly influence potential lenders and their investment decisions.
Each founder expects to receive funds in the least expensive way for himself and in the largest amount. Accordingly, priorities in choosing ways to attract investors should be placed in accordance with the above facts.
Not all methods are suitable for a single startup. VCs are more interested in biochemistry, electronics, and IT companies than in food-oriented businesses in a local location.
A social startup can easily be supported by voluntary contributions from people who are interested in this topic. For a modest fee, when placed on a crowdfunding platform, such a company receives even more investment than originally planned.
Business incubators, various funds and business angels are ready to spend money with certain guarantees from the founders. This could be a stake in a business, an introduction to the board of directors, or a person in charge of operations management.
Not all entrepreneurs are ready to allow an investor to manage a startup, which significantly limits the circle of potential investors, moreover, if we are talking about impressive amounts.
To participate in various conferences and forums, you need to be a well-prepared speaker. It is necessary to be able to convince people in a word of the attractiveness of their ideas and future development prospects. The eloquence and charisma that a good speaker is endowed with are talents not given to every entrepreneur.
Features of the Russian market
Russia does not stand aside from global trends in business development. There are a number of funds ready. Most of them are state related. Skolkovo and the Small Business Development Fund allocate grants of up to 150 million rubles for projects in the IT field, medicine and space.
The regional government subsidizes a start-up business if the project is related to the sector of the economy that prevails in the given territory.
Internet platforms are intensively developing: Napartner, Planeta, Startup.Network and others. They have different placement conditions, but each of them has a chance to find an investor and profitable cooperation.
Residents and foreign capital are ready to make.
The project starts in the country, and then raises money and moves to where the number of clients prevails or closer to investors.
We live in a global world and are obliged to respond to the processes taking place in it. Everything is interconnected and the business meets the needs of today and looks forward. Startup ideas are in the air. Whoever catches and sells first will win.
Investments are not only small investments from an individual in certain assets, but also the engine of the modern economy, the foundation on which all business currently stands. More than 90% of all enterprises need additional sources of financing. Regardless of the volume, turnover, scope and direction of activity. And investments can be directed both by individuals and other companies. What exactly is it, what are the ways to attract investment in a business, what types and types are there, and many other related issues, we will consider in this review.
The essence of the concept
These are investments of a private or other nature in some asset. It can be a financial instrument, product or product, as well as a project or startup. The idea is simple, a person has free money. And in parallel, there is a certain entrepreneur who is interested in third-party provision of funds. They are necessary for the creation, development or expansion of the project. Accordingly, it is extremely logical for a citizen to simply transfer his savings to this company. To help them increase their income. And in the form of receiving dividends, he can retain part of the profits. And also get back the entire amount spent.
On the other hand, the enterprise may burn out. And in this option, the investor will not only not see any dividends, but even the amount spent in principle. The conclusion follows from this - there is always a share of risk. And it is she who often determines the type and method, as well as the possible amount of income. The more risk, the bigger the jackpot is expected.
The question remains how to properly attract and interest investors in your small business. How to find people who are ready to solve financial problems. Monitor special platforms? Or maybe put an ad in the newspaper? In fact, the advice is simple - you need to increase the investment attractiveness of your company. And even then the search will be many times easier, the interested investor will reach out himself.
What is it for
The answer lies on the surface. But not for beginners who have recently decided to try their hand at the entrepreneurial field. Companies need money at any stage. Especially if it is not even legally registered yet. It is thanks to either borrowed funds or investments that most enterprises start their activities.
But even if the founders have significant capital to start, and they do not need third-party injections to organize activities, they still need a methodology. After all, the new source allows:
Grow and develop, do not hold back when shaping the financial strategy.
To increase the turnover, quantity and quality of products, the volume of services offered.
Open spheres, additional branches.
Acquire subsidiaries or a completely new startup.
Master the horizons in geographical terms, cities and subjects of the Russian Federation, the creation of branches.
Investing is a way to avoid stagnation. Whatever the initial capital, no matter how great things go, you can always do better. Really send an additional array of money into circulation. And increase the expected profit by paying off investors, making your own company bigger, more reliable and more stable.
Species diversity
Modern classification implies gradation into many types, depending on the term, ultimate goal, risk level. We will highlight several techniques so that the task becomes as clear and visual as possible.
The simplest - in terms of time:
Long-term. Often a period of more than five years is implied. But in some industries, the term starts from three.
Medium-term. At least a year. The cap is again determined by the industry. Three to five years, as we remember.
Short term. All the rest. That is, the period is less than one year. It is worth knowing that in some areas there is also an extra-term time perspective. But this is usually not an investment in some company, but, for example, the purchase of binary options.
There is a division according to the degree of risk:
Conservative. That is, very safe, having an almost zero chance of failure. Such assets are usually needed to protect your investment portfolio. After all, they don't make a lot of money. But they insure their more dangerous counterparts. At the same time, a conservative type portfolio can serve as a deposit to beat inflation with a small profit.
Aggressive. Here the chance of losing the entire deposit is real, tangible. But the payback can reach several days. And in the medium term, there are cases of earnings of two thousand percent.
Medium. The level of danger balances profitability. But almost always there is a clear shift in one direction or the other.
Common myths about investing
Entrepreneurship will not survive without investment as such. But in the lion's share of cases, novice businessmen have a poor idea of \u200b\u200bthis mechanism, they believe in several false stereotypes:
The main thing for investors is profit. No, the key aspect is the level of risk, the absence of losses.
It is similar to bank lending. Absolutely not, the contributor not only provides more than just finance (provides connections, advice, assistance), but also bears risks along with the founders. The bank will always take it back.
The main thing is a unique product. This may be the case when it comes to ventures.
You can't share bad news. On the contrary, it is necessary. After all, the investor himself is personally interested in success. If he loses the project, he will also lose. He will do his best to help, lead the company to success. Nothing can be hidden from him.
Before deciding how to attract investors to your business project, think about where the funds will go. And choose an asset shape. This may be a direct injection of money, shares, other securities, real estate and production facilities. Lots of options.
Main ways to attract
A few can be identified, as bank lending, bond sales, private loans, and even deferred payment services can all contribute to some degree.
But implying a narrow meaning - it is only about people or companies that direct a certain amount of financial resources into an asset. And for this, it will be necessary to increase the attractiveness of the project by all means. It is necessary to show it as profitable and safe as possible, convince of the relevance of the product or service, the presence of a customer base that will provide demand, as well as demonstrate differences from competitors, the ability to conduct business in their field and successfully advance.
Attracting investors to a business project: instructions
For clarity of the solution, we will form a small step-by-step algorithm. It will detail what actions you need to take, and which it is better to refrain from.
Step 1 - looking for a source of investment
Of course, it is worth starting our plan with this task. Various platforms are suitable for its solution. You can organize crowdfunding, which has now become very popular. This is how ICO projects often work. It is worth turning to the mass media, advertising platforms, from YouTube to social networks. Look for new connections, develop in the field. As an option, resort to the services of professional promotion.
Step 2 - Summary
To some extent, this is a commercial offer. Which, however, is not aimed at the benefit of the client, but at the attractiveness of the project. That's right, the expert himself will evaluate his profit. You need to show how good the idea is. How are you going to act, what goals and objectives are at this stage. Prospects for the future, team composition, established points of contact. And of course, a detailed business plan.
Step 3 - Choose a Trusted Partner
It is always worth choosing not the most profitable, so to speak, but reliable ones. The same is true with deposits. Those who have not lost a deposit in the first months of work know this simple truth. Make sure it's reliable.
Step 4 - the form of dividends
Determine what exactly the person or company will receive in the end. Will it be a profit in cash or a share of the entire project. Whether the amount of dividends is calculated from the income of the enterprise or from the amount of invested funds. There are many nuances, everything will have to be calculated scrupulously.
Step 5 - we convey information to the target audience
Define communication channels in advance. You can use several at once. The main thing is to present information in the most vivid form, in the way where the project will look great. But without outright lies, otherwise the reputation will suffer.
Step 6 - Negotiate
Confidently, clearly, politely and adamantly. Stand your ground, voice the conditions in such a way as to show their convenience and profitability for the partner. But do not make any concessions in a row, just so as not to lose the contributor. Sometimes it makes more sense to refuse. What is important, you need to remember a simple rule. During the negotiations, tell everything you wanted. Until the last word, do not look for a reason to insert information, highlight all the points.
Step 7 - conclusion of the contract
Here is the final stage. You can safely put your signature on paper, but only if you carefully read all the essential conditions.
Ways to attract investment, competent presentation
This is a proven method that always gives excellent results. It has been successfully used in many areas, from term papers to demonstrating a new product on the market. After all, a visual presentation, accompanied by clear and concise comments, allows you to build a marketing speech as accurately and clearly as possible, emphasize beneficial aspects, and reduce the impact of negative factors.
The human moment takes its toll, the eye-hook remains tightly with the viewer, this image can make you fall in love with yourself. The content is determined by the entrepreneur himself based on the advice of professionals, marketers and managers. But there are a few basic points that should be mandatory.
Introduction. It should contain not only general information, but best of all, a slogan. A sonorous phrase that evokes associations with the company.
Argumentation. You must prove to partners that your proposal will bring them success, fight objections, give logical arguments that they can fully understand.
Text. It is better to make a couple of slides without visual accompaniment. Then they cause the feeling that they contain the main information, mandatory.
Gain. And this is where the image matters more than ever. It is better that it be a bright and powerful visual image with a short but effective caption.
Typical beginner mistakes
Let's analyze a number of the most common missteps that can completely ruin a relationship with a partner that is starting. Avoid them by all means available.
There are no exact options for organizational moments. Most often, if retail sales are meant, for example, the aspect of the operation of cash registers is unclear, there are no points for purchasing equipment and software. It is better to find a seller in advance who can bring tangible results. If we talk about an example, then the Cleverens project will be an ideal performer. These are software solutions for accounting, inventory, installation and operation of online cash registers, registration of product codes. The program is focused on Russian legislation. This way you can show investors that there will be no performance problems.
There are no exact numbers. It is better not to start negotiations without pre-prepared calculations. Especially if there are no specific values for dividends. After all, they came to you precisely for them, for the future return on investment. It is worth showing it in all aspects.
There is no competitive war. Implied advantages over similar products in the field. Or some prepared cheaper options for supplies, purchase of equipment. The ideal way out will be a unique and viable idea or model, which is not yet available in the market environment.
Investing has become a fairly common modern form of income in our country and abroad. Almost every person thought about investing their savings in some kind of project. But the problem of attracting investments is still a key one in Russia.
The definition of "investment attraction" in the modern economy has this meaning: it is the investment of savings from an individual or company in some project in order to generate income. Those who make investments are called investors.
There are many classifications of investments based on different criteria. Here are the most important ones.
They can be divided, for example, according to the object to which the investment activity is directed:
- real investments - investments in construction, overhaul;
- financial - investments in securities, including through investment funds, issued credit funds, as well as leasing;
- speculative - trading in non-ferrous metals and securities.
Depending on the form of ownership, certain groups of investors are formed. Keeping this in mind is extremely important when attracting investors to your business.
Another important criterion for dividing deposits into groups is the form of ownership of investment resources. This classification is based on the features of finding and attracting investments in your project. Here they distinguish:
- state - issued to ensure strategically important projects and may even fully cover the costs of the project;
- private - investments from private investors;
- foreign - investments from persons who are not residents of the Russian Federation. It also includes deposits from foreign companies.
Ways to attract investment
There are several ways to raise funding. The main and most common ones are:
- investment in the authorized capital of the enterprise;
- debt financing;
- bank lending with collateral;
- bond loans.
By investing in the authorized capital of the enterprise, the investor buys a share in the business. That is, he has a block of shares in his hands, which confirms his rights as a co-owner (shareholder).
In the case of debt financing, investors are the lenders. All funds allocated to the company are registered as debt.
Bank lending with collateral provides for the receipt of borrowed funds for a certain period. Shares and assets of the company can serve as collateral.
Bond loans are essentially loans that are issued to the borrower who issued the bonds. Such securities confirm the right of holders to receive nominal value from the borrowing company within the established time limits.
How to interest and attract an investor?
How to interest an investor and motivate him to make a contribution? In order for a person or company representative to want to invest in any project, he must make sure that this project is beneficial for him. This is called investment attractiveness.
It is believed that in order to guarantee the attraction of investors to your business project, you need to go through 4 consecutive steps. If everything is done correctly, then the question of how to attract investors will no longer be a headache.
Step one - choosing a partner whose reliability you can be sure of
First of all, in order to find a contributor, you need to imagine how he will react to some circumstances. For example, the behavior of investors often depends on the stage of development of the proposed business project. At the initial stage of its development, it is not of particular interest to them, so the search for an investor and investment becomes the biggest problem at this time.
Most often, money is invested in a completed project, because in this case the risks and incomes that accompany it are already visible.
Step number two - correctly convey information to the target audience
The easiest way is to search for contributors in the same field of activity as the project, as they will usually feel more confident and knowledgeable in this case, this makes it easier to attract investments. But it also happens that one investor invests in completely different areas.
In order to correctly present your project, you need to work it out well, arrange it in an attractive form for the investor with justification of all its advantages. This task can be left to the consulting service. Also, the project must specify the total amount of investment that is required for it.
The main goal of this stage is to prove to the investor that the project is profitable for him, quite real and profitable.
The success of attracting an investor at this stage depends on how well you submitted your project.
The third step is confident negotiation
If the business project is well described in the submitted resume, then a potential investor can offer a meeting. First of all, carefully read his proposal, compare whether it matches your needs.
If the investor's proposal is not particularly interesting, then you can take a little time and wait for the answers of other potential investors.
Prepare for the meeting in the most thorough way so that there are no hitches in your response to investors' questions. Prepare and rehearse an oral presentation of your proposal, yourself and your team. You must present yourself as brightly and energetically as possible.
Step four - signing the contract
Attracting an investor and all the agreements that have been reached between you must be documented. This gives grounds in case of non-compliance with the contract to bring to responsibility the party that violated it. Documentation is the final step.
To fix all the conditions for the provision of a deposit, a document is drawn up called the "Terms of the transaction". Requirements for its compilation:
- designation of all conditions that relate to the relationship between the owner of the project and the investor;
- the unambiguity, clarity and unambiguity of their writing, so that this does not complicate their interpretation in case of disputable situations;
- a clear and complete indication of the forms and volumes of investments, as well as the designation of punishment for failure to comply with the terms of the contract.