Starting a business is an exciting, yet expensive journey. From the idea to prototypes and first products, you need money every step of the way to get your startup off the ground.
Many founders first opt for bootstrapping to finance their activities. But unless you have thousands of euros in your pockets, you will eventually need outside investment to scale your business and grow.
The right investor can provide funding and, more importantly, can serve as a mentor and bridge between you and other business opportunities. The question is—where to find one. There are many options, so let’s look at how to get investors for your startup and ensure your chosen partner can help take your business to the next level.
Why raise money
About 10% of new businesses fail within the first year. Sometimes, this is due to a lack of proper product-market fit, but in most cases, it’s because founders run out of money too quickly and can’t recover.
Startups are meant to grow fast and burn cash to sustain growth. Developing the product, hiring employees, doing sales, and entering new markets are essential to scaling and beating the competition. Yet, not everyone has the money to cover these costs year after year before achieving profitability. And that’s where external funding comes in.
Raising capital helps keep the business alive, accelerate its development and provide additional stability to your startup. What’s more, strategic investors can bring knowledge, industry connections and insights that can be crucial to expanding your business.
As long as you have a clear vision, a product that has already attracted customer attention, and a market large enough to bring profit, you’re ready to talk to investors.
How to find investors for a startup: 7 funding options
From close friends to professional investors, understanding the different sources of funding and what they offer can help you find the right path for your business. Let’s explore the seven most popular funding options to push your startup forward:
1. Friends and family
One of the most common ways to raise initial capital is through friends and family. They are often willing to invest based on trust and belief in your vision and don’t ask for interest rates or partial ownership, making this a low-barrier funding opportunity.
However, just because you’re close friends or family, doesn’t mean you should skip all the formalities. You know them best, so think about the most effective way to present your case—a phone call, email, chat over dinner, or a more serious presentation at the office.
Also, don’t forget to agree upon repayment terms, their expectations, and other important matters to avoid misunderstandings later.
2. Angel investors
Angel investors are wealthy individuals (think Shark Tank) who are sometimes entrepreneurs themselves and invest their funds in early-stage businesses with promising ideas.
Unlike venture capitalists, angel investors are more open to taking risks and investing early in exchange for equity or convertible debt. Having entrepreneurial experience themselves, they know that the first investment can be instrumental to bringing the idea to life. That means, however, that their checks are usually smaller than those of VCs.
Angel investors first and foremost want your business to succeed, so they often serve as mentors and can provide guidance on certain business decisions. They are also willing to grant access to their influential network.
Keep in mind that most business angels prefer to form personal relationships with founders before investing any money. They also tend to support businesses coming from their own countries or representing specific industries and values. If the idea is close to their hearts, angel investors won’t hesitate to invest in it.
3. Venture capital
Venture capital is a type of equity financing, which involves selling your company shares in exchange for capital. It’s a typical route to funding for businesses that have already established themselves but are still considered early-stage startups looking for rapid expansion.
Venture capitalists operate with privately-owned funds provided by a limited group of partners—most commonly institutional investors or wealthy individuals. VCs invest in businesses with high growth potential hoping to earn substantial returns upon exit in 8-10 years. Hence, they are often involved in the startup’s operations, and some investors might also require a board role.
Venture capital funds take risks and participate in different investment stages, from pre-seed to Series D, ready to invest more money as the startup grows. They usually, however, focus on a specific stage, either acting as an early-stage investor or investing tens or hundreds of millions in growth startups. FIRSTPICK is one of those VC funds that offers investment for early-stage startups.
Bear in mind that VCs typically create a portfolio of companies within a specific field or industry, like healthtech or cybertech, so look for one that best fits your profile. Unlike friends and family who may invest out of compassion and belief, VCs prefer bold, hard-working individuals that present scalable business models with significant market potential.
4. Startup incubators
While not a direct funding option, startup incubators can provide financial support for buying equipment or designing prototypes and access to office space, mentors, and other resources. They may also help refine your idea and find the most appropriate seed funding.
Business incubator services can be particularly useful for brand new companies with close to zero funding or individuals who want to test and develop their business models.
Most business incubators are attached to universities with the main aim of supporting student startups, yet public institutions and even private companies also sponsor many incubators.
5. Startup accelerators
Similar to startup incubators, startup accelerators offer companies various resources. They are usually structured programs with application rounds a few times a year. In addition to connecting startups to investors, accelerators also help them grow rapidly by offering mentorship, networking opportunities, and training within a set timeframe.
The majority of startup accelerators are focused on specific industries, and their programs can be quite intense, requiring a lot of time and effort to meet the obligations. The struggles, however, pay off as startups participating in accelerators tend to succeed and raise more investment than those that don’t take part.
Some startup accelerator programs also offer early-stage funding in exchange for an equity stake – typically 3-10%. In many cases, the percentage is non-negotiable, and you must give up a small part of your company to join the accelerator.
6. Government programs
Governments also offer grants and funding programs to support startups. These funds typically don’t require equity and can be an excellent way to secure non-dilutive early-stage capital. They are, however, often tied to a specific goal, which means you can use the funds only to buy equipment, do research, or cover material costs, for example.
Government grants are usually administered by different municipal or national level institutions that are concerned with business development, so keep an eye on the newest opportunities on their websites.
7. Crowdfunding
If you don’t feel comfortable giving up a part of your company in exchange for investment yet, crowdfunding can be a great alternative. It involves a large pool of people investing in your startup and receiving early access or other benefits in return.
Crowdfunding can be particularly effective when your business is in the prototyping stage or preparing for a new release. Keep in mind that the success of your crowdfunding campaign will largely depend on the market, problem you’re trying to solve with the product (B2C or B2B), and the rewards you offer.
Check out platforms like Kickstarter or Indiegogo to start crowdfunding and raise capital from individuals all around the world. This can also be a great method for validating demand for your product—a proof most large investors require.
Where to find investors for your startup
Finding investors requires strategic preparation. Approach this task the same way as B2B sales—build a database of investors that could be a good fit based on the industry, region, or startup stage they usually invest in. Then, seek different opportunities to meet and connect with your potential partners.
Remember, no investor will grant you funding after just one meeting or pitch, so you should always try multiple options simultaneously to increase your chances of securing the first investment.
Some effective ways to connect and form relationships with potential investors include:
- Networking events—attending industry-related events can give you opportunities to network with angel investors and VCs and get to know their expectations or even first impressions of your business. Many conferences have dedicated networking events as part of their agenda.
- Industry conferences and exhibitions—participating in pitch competitions or booking private 1:1 meetings can offer you a chance to pitch to an investor in person. In this regard, Slush is one of the biggest founder-focused events in Europe.
- Engaging with fellow founders and startup communities—talking with fellow founders in person or online can help you gain warm contacts and useful tips on dealing with certain investors and getting investment.
- Incubators, accelerators, and university programs—participating in different entrepreneurship programs can grant you access to their network of investors and facilitate your connection with them.
- Online investment platforms—websites like Crunchbase or Ventury.app can help you find the right investors.
- Social media—creating a stellar LinkedIn profile, connecting with potential investors, and posting relevant information about your business can be the first step towards building relationships and securing funding.
How to secure investment
You’ve found a potential investor. Great. But the biggest challenges are still ahead of you. It can take 3-4 months or even longer from the first contact with the investor until you get the money in your bank account, provided the deal actually goes through.
Here’s what you should do to make the most of your time and effort, and increase your chances of getting investment:
1. Evaluate your readiness
Before approaching investors, think about why you need funding—how much money you need and how you will use it.
Are you at a stage where you’re ready to give away an equity stake or are you looking to retain control of your business and bootstrap? Or perhaps you’re at the very beginning and would benefit from structured training to develop your startup idea.
You should be clear about your expectations and what you can promise in return. Investors won’t get in a discussion without seeing a solid plan demonstrating your understanding of your business’s status quo, growth potential, and profitability.
2. Build relationships
Establishing relationships with potential investors before asking for funding can increase your chances of success. Inviting them to invest in your business over email or sending your pitch in the first LinkedIn message is the worst thing you can do.
Investors are more likely to fund startups they know and trust. Invest your time getting to know your potential business partners. Check what kind of startups they’ve invested in before, research their professional goals and interests, and understand their needs.
Make sure you have multiple conversations with the investors at various occasions and know each other quite well before moving onto real investment talks.
3. Perfect your pitch
A well-prepared pitch is critical to convincing a potential investor. And the essence of a great pitch is a detailed and thought-out business plan.
When you prepare for a presentation, have your value proposition, market potential, and strategy defined and described in detail. You need as much evidence as possible to show your business is not just a dream, but reality. That includes showcasing responsibilities and expertise if your team members. Finally, think about the story and style of your pitch—how will you appeal to and persuade the investor?
Pitching is difficult and for many founders it seems like the last thing they would do. But practice makes perfect. Test your pitch in front of your friends and family or in smaller competitions to feel more natural, gain confidence, and ensure your final presentation is error-free.
4. Learn from your mistakes
Rejection is part of the funding process. If one investor says no, learn from their feedback and refine your pitch for the next opportunity. Don’t take it personally but rather view it as a possibility to improve your business model and presentation skills.
Startups rarely get investment on the first try, especially if you’re talking to an early-stage investor. Show your dedication and potential, and you will eventually get that funding. Once the first money is in, subsequent investments will come easier and faster.
FAQ
1. Where should I look for my first investors?
Start with your personal network, angel investors, and crowdfunding platforms. Networking at startup events and using platforms like Ventury.app can also help.
2. How long does it take to find an investor for a startup?
The timeline varies but can range from a few months to over a year – for pre-seed, it can take 2-4 months and for seed 3-6 months. Dedication and preparation are key factors in securing funding.
3. How much do investors invest in startups?
Investment amounts vary based on the startup stage. In the Baltics, the average pre-seed investment ranges between 250-500k EUR, whereas at the seed stage, it is between 850k-2M EUR.
4. How much equity should I give away?
The amount of equity depends on your funding needs and valuation. Startups typically give away 10-20% equity in early rounds.
5. Can I have more than one investor in a round?
Yes, multiple investors can participate in a single funding round. Syndicates and co-investments are common in startup financing and can help you raise more capital.
6. How do I decide which investor to pick?
Consider their industry expertise, network, and alignment with your vision. The right investor should offer more than just capital—they should add strategic value and knowledge to your business.
Conclusion
Securing investment for your startup is a challenging but rewarding process, especially if it’s your first time raising capital. Yet, understanding different funding options, actively networking, and having an impactful and compelling pitch can increase your chances of attracting the right investors.
Remember, funding is not just about money—it’s about finding partners who believe in your vision and can contribute to your startup’s success. Stay persistent, learn from rejections, test different paths, and keep refining your approach to get the best possible investment for your business.