When you have a good idea for a business, money may be the only thing standing between you and industry domination. Finding investors for a start-up concept can be a daunting prospect. It is also a process that can put entrepreneurs in a vulnerable position, especially if the business doesn’t succeed.
Finding investors for your company is important, but you also have to protect yourself and your business idea when you take money from others to make it a reality. Where can you look for potential investors, and how can you protect yourself from liability to those investors if the business doesn’t go the way you hope?
People often tap into their personal networks for investment
If you don’t have experience running a business, banks and other mainstream sources of financial investments may not consider you a viable candidate for financing. Even those with good credit scores and great ideas may walk away empty-handed after pitching to professional investors or a local financial institution.
Instead of looking for one massive investment from a third party that has no relationship with you, it might be a better idea to look for multiple small investments from people you know. Your family, friends, co-workers and even neighbors might be willing to chip in a few hundred dollars to help you get your idea off the ground. Multiple small investments can sometimes be easier to locate and secure than one large investor. They can also be easier to negotiate with and pay back later.
Consider pitching the idea to established companies
One interesting way to potentially get investors for your startup is to go to a business that either inspired your idea or would serve as a competitor if you should become successful. If they see the merit in your concept, they might be willing to back you financially so that they have a partial ownership interest in the final company.
Regardless of whether you seek financing from investment clubs, people you know personally or another company, it is important that you have clear-cut investment agreements or contracts and that you do not lie or commit fraud in your attempt to secure investment.
Reviewing your business plan and discussing your strategy for finding investors with a lawyer can help protect you from mistakes that might cost you in the future.