Funding for start-up companies is essential and not always easy to source.
Unless you already have a substantial nest egg or are independently wealthy, it’s almost impossible to start a new business venture without bringing in outside investors.
This can be an extremely difficult process, involving some enquiry and investigation about those you think might be interested in investing in your enterprise.
The right choice
When you’re starting out with no seed money, it’s tempting to accept the first investment offer that comes your way.
Entrepreneurs enthusiasm often makes them use all their energy and ingenuity in finding and persuading investors – any investors – of their worth.
Unfortunately, they often make the wrong decision about who to accept money from and under what terms.
Selecting your potential investors carefully can save you a lot of time as well as making success more likely.
The investor that is right for your company is more likely to say yes than another who recognises on some level that it just isn’t a good fit.
In the long term, going with the wrong investor can cause difficulties, even if they give you the money you need.
They may want more control over your venture than you want to give them, or they may have very different ideas about the direction in which you should be heading.
The right investor, on the other hand, will support you when the going gets tough without being overly pushy and manipulative.
They will ask you what you need, rather than telling you what to do.
Friends and family
Friends and family are often first choice as investors.
This is because they obviously want to see you do well.
Sometimes though, they are not always the best choice.
You will need your friends and family for emotional support and impartial advice during the difficult first years of your venture.
This is easier if they don’t also have a financial stake in it.
An ideal investor is someone who will introduce you into their wider network, creating access to some useful contacts, as well as lending you money.
Potential investors should also have a solid understanding of the investment world.
You need to find someone with experience in the field so do thorough research before making an approach.
An example of such a person is Fahad Al-Rajan who is a successful leader in the business world.
At number #277, Fahad Al-Rajan is also the head of Bahrain’s largest lending bank, Al Ahli United, and also chair of the Wafra Investment Group in New York.
The right people
Many successful entrepreneurs will tell you that ultimately choosing the right investors is about choosing the right people.
If you feel a strong connection and understanding with them as individuals then that is more important than the company they represent.
There is a lot of talk about whether VC or angel funding is the best way to go in terms of investment options.
Both have their merits, but it is the individual investor that matters more than the model.
Don’t rush in and take the first offer on the table. Think hard about who you’re going to partner with as this is a long-term decision.
The success of your venture may depend on it.