How to Raise Business Capital from the Investors?

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94% of the startups fail in their first year of operation, and the most common reason behind it is funding. No business can run without enough capital investment.

Arranging funds is one of the most critical aspects for small entrepreneurs, particularly in initiating their startups. This article is a guide for those looking to raise capital from investors. Anybody looking to utilize investors' capital in their business plan must know about the types of investors. There are mainly two kind of investors, who provide funding to startups.

Options for Raising Small Business Capital from Investors

• Angel Investors are financially rich people and have expertise in certain fields or functions. They look to invest in certain startups, while providing their expertise and guidance, if necessary. They invests at quite the early stages, and particularly care about the passion, commitment and integrity of it's founder/s.

• Venture Capitalists are those, who normally invest in startups purely with the Return on Investment mindset. They provide funds during early and/or growth stages. VC's look for a strong management team, a large / substantial potential market, a unique product or service, along with a strong competitive advantage or differentiation.

Their Characteristics:

Both types of investors look forward to investing in established organizations with tested products and services. Angel investors generally are more keen to invest in small startups than venture capitalists, who prefer the established ones. However, you must keep in mind, that both these investors are really concerned about the repayment of their investment as well as the return on investment (RoI). Your business plans must furnish the above information, besides the investors will only show interest in investing, when they find an robust and exciting business models.

Some tips to consider before you present your business plan/s to potential investors:

• Clearly, mention how much funding you’re looking for.

• Mention why you need this fund and how your business will benefit out of this investment.

• What return on investment (RoI) can the investors expect from your business and how soon (1, 3, 5 years).

• In addition, what is the payback period for the investors (1, 3, 5 years).

• What the investors will receive for their support (for e.g. Equity stake, Founder, etc).

• What reporting structure will you provide to keep investors in the loop about the happenings of the business and how their money is being spent.

• Create a convincing business plan and strategy with a support of a strong management team, a strategy convincing enough to earn good profits.

• Unless you develop these, it'll be a time waste for both you and investors during the pitch for investment.

Need help, to prepare your business plan, click here!