Securing Funding for Your Business Idea: A Guide for Aspiring Investors
If you have a business idea and have validated its feasibility, your next step is to develop a solid business plan. This is crucial for attracting investors who can provide the necessary funding to bring your vision to life. One way to find investors is through venture capitalists (VCs), who can be reached through various online platforms like Crunchbase, , and Loopon. Another option is to use crowdfunding platforms to share your idea and collect funds from a broader audience.
Understanding Your Investment and Its Returns
If you are already investing in your idea, the next step is to ensure that it is visible and offering tangible returns. This means more than just profit; it could be gaining new customers, entering new markets, or increasing sales. If your idea is still in this early phase and you are looking for funding, you need to demonstrate that there is a market for your idea, and you have a clear plan for how to monetize it effectively for both you and your potential investors.
The Challenges of Early Stage Investment
Very few people outside of your immediate family would be willing to invest purely on the basis of an idea. To make your idea appealing to investors, you need to minimize these risks by conducting thorough market research and developing a solid business plan. Show that your idea has a viable market, and that you have a clear strategy for deploying resources to make a profit.
Additional factors to consider include the potential for patents. If your idea is patentable, at the very least, you should file a patent pending application to establish intellectual property rights. However, raising funds at this stage can still be expensive, given the high failure rate of start-ups. Investors will demand a significant stake in your business to protect their investment.
As a result, many start-ups rely on friends and family for initial funding, or they save and work to fund their business themselves. Once you begin to generate revenue and attract customers, the interest of angel investors starts to increase significantly.
Why You May Not Always Find Investors
Many people believe that the answer to obtaining investment is to simply present your idea and wait for potential investors to take an interest. However, this is often not the case. Instead, you need to turn your idea into an attractive proposition by clearly showing its potential for profitability, scalability, and the ability to grow in the competitive market.
One of my personal experiences comes from setting up a digital advertising agency in 2017. I needed about three hundred thousand Nigerian naira to get started but was reluctant to apply for a bank loan. Through a Quora update, I learned about The Tony Elumelu Foundation, which provides grants and guidance to young African entrepreneurs. After thorough research, I applied for funding and was thoroughly evaluated based on my business plans and operations.
The key factor that caught my attention during this process was scalability. The foundation required that the business plans demonstrated not only the ability to start but also the potential for growth and competitiveness. I was not successful that year, but the experience taught me the importance of showing investors a business plan that is both profitable and scalable.
Investor Expectations
When potential investors review your business plans, they are looking for more than just a detailed outline. They want to see evidence of profitability, the ability to increase capacity and demand, and the potential for the business to thrive and compete effectively. These are the key factors that make your idea investable.
As an investor, my primary concern is the return on my investment. I want to see a solid plan that not only outlines the immediate goals but also demonstrates the long-term potential for growth. Your beautiful plans, no matter how well-designed they are, will not attract investment if they do not address these fundamental aspects.
So, if you have a great business idea, it is essential to work hard to finance it yourself. That way, you can handle the risks and ensure the success of your venture without relying on the generosity of others. However, if you do seek external investment, make sure your business plan clearly addresses the criteria that investors are looking for. The outcome will be much more fruitful.