Questions

How to find investor in startup IT company?

I have a business plan for making great software product. The product market are banks (finance) who needs this type of product. I have worked in three banks in my country. I have already made one software and sold it, few years ago, to 8 financial institutions (banks). I want to develop different product for banks. First version for sales can be developed in 4-6 months. Software would be sold as a service (monthly ongoing payments). I am an expert in finance (banking). I started learning coding in C# to be able to participate even in coding. Costs of development of first version of product are around 10,000 USD. I can offer percentage of company equity. How can I find an investor who would be interested in investing in startup, who can sell this product worldwide?

4answers

I've found great success in using LinkedIn for find accredited investors individually.

Additionally, look at industry-related news websites (GeekWIre or TechCrunch, for example), specifically those who cover funding. Their announcements include the groups backing the project.


Answered 6 years ago

First of all, be careful about submitting business plans to an angel investor. They go for the 'deck' instead, especially during the early stages.

I would suggest AngelList, which is the best platform to find investors http://angel.co

Also, I would suggest you take the startup class Y Combinator prepared with Stanford University. It will give you a lot of guidance on how to get funded fast:

http://startupclass.samaltman.com


Answered 6 years ago

To find an Investor for start-up you must understand how the stages of company are related to Investors. Here is a deeper look at some typical private investment options based on company development stage:
1. Idea Stage: In this stage, the entrepreneur is still developing and fine-tuning the concept of the start-up and needs funds to complete essential tasks such as creating a detailed business plan. Funds are typically raised through personal finances or close connections in this early phase.
2. Bootstrapping: You are the investor. At the Idea Stage, it can be difficult for companies to attract outside financing, so in many cases, it falls to the founder to provide the initial start-up capital. While investing your own money can be risky, it also allows for complete control of the business void of any outside influence or conflicting visions. Funding a start-up with personal finances in the Idea Stage is also a way to safeguard yourself from debt should the venture not succeed. As the business grows, however, it is likely that you will not be able to sustain it with your own money and will eventually need to bring in outside investors.
3. Friends and Family: Most entrepreneurs receive substantial financial assistance from friends and family in the Idea Stage. These tend to be the true believers in your project or those who are closest to you and want to see you succeed. While these ‘investors’ tend to be easier to handle and less involved in the day-to-day operations, accepting money from those closest to you can bring about personal tension and stress. Friends and family may not be checking regularly for a return on their investment, but they be will anxious to get their money back (and then some) as the company grows.
4. Pre-Seed Stage: In this stage, the entrepreneur needs additional funds to sustain current growth and to perform tasks like market validation. An entrepreneur can continue to rely on funding options from the Idea Stage in addition to exploring some new external avenues as well. Pre-Seed is still a relatively new phenomenon in capital fundraising that has come about as a response to investors dedicating less money to new ventures in the Seed Stage. Entrepreneurs are continuing to refine their approach to funding in this stage as new lessons and best practices are being discovered regularly.
5. Crowdfunding: The great thing about crowdfunding for start-ups is that it opens the opportunity for investment to literally everyone. By using websites such as Kickstarter, GoFundMe, and Indiegogo, you can pitch your business idea or product and let people around the world donate money without having to cede any equity in your company. Crowdfunding is a hands-off approach to investment when it comes to impacting your actual day-to-day business operations. While crowdfunding may seem like a grassroots approach, many start-ups have received millions in donations.
6. Incubators / Accelerators: Businesses in the Pre-Seed Stage that show significant promise can apply to incubators or accelerators to receive several benefits. In most cases, if your company is invited to participate in one of these programs, you can expect a state-of-the-artwork environment, business mentorship, strong industry connections, and for the most promising ventures, seed funding. Being accepted into a start-up incubator or accelerator is exceedingly difficult as there is a significant amount of competition. Additionally, receiving funds is not a guarantee as many of these programs are designed to help an entrepreneur grow his or her business by providing mentorship and resources other than money.
7. Angel Investment: Start-up angel investors are part of the private sector. However, angel investors are usually individuals rather than private firms, so investments tend to be smaller – think $25,000 to $100,000. These players invest in you with the expectation of a high return on investment (ROI) and may choose to play a larger role in your start-up by requesting input on daily operations. Angel investors may also ask for a seat on your board of directors.
8. Seed Stage: The Seed Stage marks the point in a company’s growth where all of the initial preparation comes to fruition and the business begins to acquire customers. For an entrepreneur, the challenge in this stage is to carve out a market share and to find a way to ensure repeated success. At this stage, a Series A funding round to raise anywhere between $1M – $30M will need to take place, which typically leads an entrepreneur away from individual investors and towards investment firms.
9. Venture Capitalists (VCs): These investors are part of the private sector and have a pool of money to draw from corporations, foundations, pension funds, and organizations. Investments in businesses that are rapidly expanding or have the potential for substantial growth can average $7 million depending on several factors. Venture capital investments are more common for tech and biomedical companies. These firms will play a more active role in your start-up, as they will receive some equity in exchange for funding and will help provide expertise in guiding you throughout your development stages. VCs for start-ups can be utilized in the early or late stages of development as some specialize in working with companies in the Seed Stage whereas others may prefer to work with more established businesses. Venture capital is ever-changing and requires significant research prior to coming to terms with a VC investor on a funding round for your start-up.
10. Venture Debt: This type of funding is only available to those entrepreneurs whose company is already venture-backed. Venture debt funding is essentially a loan that you will have to repay, regardless of if the company is profitable, without having to give up any equity. Repayment terms can vary, but three years is the average. Venture debt is a great tool for short-term financing, especially for companies who need to make a one-time purchase and simply don’t have enough capital on-hand at the time, such as a retailer re-stocking for their peak season. Entering into a venture debt agreement should not be taken lightly. Missing a single repayment could force the company into being sold or liquidated due to unfavourable default terms that are typical of this funding option.
11. SBA Microloans and Microlenders: If you are looking for a smaller investment, a microloan may be your best option. The Small Business Administration (SBA), a government entity, offers a program that connects start-ups to private lenders for loans of up to $50,000. Other microlending non-profits are also available and can offer loans averaging $12,000 to $13,000. Microloans are ideal for start-ups – think flower subscription companies and independent bakeries – that are just in the beginning stages of creation and in need of seed money. As far as how much input these investors may have, it can vary on a case-by-case basis. If you are wanting total control of your business, be sure to clearly state your desired relationship and outline specific guidelines in the loan agreement.
12. Early Stage: In the Early Stage, entrepreneurs have established a sustainable sales model that has proven to provide the company with a consistent influx of revenue. Now, an entrepreneur must consider scaling the business to keep up with product or service demand. To raise enough capital at this stage, an entrepreneur will begin a Series B funding round with larger, later-stage venture capitalists, super angel investors, or revenue-based financing options. Like a Series A funding round, a Series B ranges from $1M – $30M.
13. Super Angel Investor for Start-ups: These investors be a hybrid between a regular angel investor and a venture capitalist. Super angels deal in larger sums of money, like a venture capitalist, ranging from $250,000 – $500,000 per investment, and look to partner with a company in their early developmental stages, like a traditional angel investor. Where super angels differ from other angel investors is that investing in companies is their primary profession rather than it being a side-stream of revenue. Super angels are known as serial investors are always looking for new, profitable opportunities to invest their funds. It is not uncommon for several super angels to pool resources and establish an investment group.
14. Revenue-Based Financing: This type of funding is a good option for companies in the Early Stage that have demonstrated the ability to drive consistent revenue with high gross margins. With this model, a business receives upfront capital in exchange for giving up a fixed percentage of future revenue to the investor every month until the loan has been repaid in full. For entrepreneurs who do not want to further dilute the equity of their company, revenue-based financing allows them to obtain money without losing any control. Because repayments occur monthly; however, you may find that you have less capital in-hand each month because of this agreement.
15. Growth Stage: The Growth Stage signifies that a company has achieved and surpassed several start-up milestones. It means they are looking to scale at an even greater rate by adding infrastructure and expanding operations. For an entrepreneur in this stage, funding options can become more diverse as private equity firms and banks. These options are who are more risk-averse in the early stages. They look to invest in a proven entity. This round of funding is categorized as a Series C, which seeks $10M+ in the capital.
16. Private Equity: Part of the private sector, private equity firms invest in start-ups or businesses through shares or ownership in the company. A private equity firm usually raises funds for investments through large third-party investors such as universities, charities, pension plans or insurance companies. Start-up private equity investors take a public company and make it private. This then results in 100 percent ownership of your business’ profits. Essentially, a private equity firm has the capability to buy out your company.
17. Bank Loans: Traditional bank loans can be a valuable financing option if you are able to secure favourable terms. Banks typically provide business start-up loans with the lowest interest rates and will not be given equity in the company. Bank loans do have an in-depth application process and require a strong credit rating. In extreme cases, a bank may mandate that you sign a personal guarantee on the loan. This means that they can recoup their losses from personal assets should there be a default on the repayment. There is no shortage of funding options when it comes to your start-up. Detailed research is required at every development stage. Ensure you are making decisions based on your company’s goals.

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Answered 9 months ago

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