As a new entrepreneur, getting the necessary funding for your young business is likely one of the concerns keeping you up at night. What do you do when your savings are not enough and applying for a loan is not a viable option? Well, you could try wooing an investor.
Investors are a good solution to a startup’s funding problems because rather than handing you the money as a loan, they instead get a share of your business. It might sound scary, but you’ll be gaining a resourceful partner that is determined to ensure your enterprise succeeds.
That said, every startup is risky. Appealing to an investor means going out of your way to alleviate their concerns. Below are a few things that might discourage an investor from joining in on your ambition.
- High risk factor
Certain business sectors are known to be more prone to failure than others. If your operation falls under industries like online retailing, hotel management, etc. getting an investor on board will not be easy. The same goes for dealers of products that attract strict government regulations or supervision, such as drugs and pharmaceuticals.
- Large initial capital requirements
A startup that requires an enormous initial investment will likely only be considered by large players. And even they will need you to convince them that your idea is the best they’ve ever heard. Ensure you do sufficient research to uncover the investor with whom you have the highest chance of scoring, and structure your presentation the best way you can.
- A weak business plan
An investor will not buy into your startup unless you show them that you have well-defined goals and a practical plan for achieving them. A good business strategy proves that you believe in your new enterprise and you’re committed to seeing it through.
- Poor public reputation
As successful business people, investors have an image to protect, and they won’t risk tarnishing it by investing in enterprises that don’t completely agree to social or legal standards. If you’re in need of funding for your construction, or firearm business, it would be best not to bother approaching an investor.
- International operations
Investors like to keep their new acquisitions close, and are therefore often reluctant to fund companies outside their geographical comfort zone. Financiers always consider overseas investments as high-risk regardless of the experience you have with them.