I have asked myself this question dozens of times. There is a cool business idea, the first prototype and the first requests from customers, but there is no more money left or their amount does not allow starting to make the second version of the product or actively developing it. Then you start looking for additional investments.
Credits.
I note right away that I do not advise resorting to loans in 99% of cases. The business at the initial stage is so shaky that everything can go wrong, even with a super-cool idea, its implementation and the need for it from the customers (which is not an example for you with COVID, when no travel agency considered this risk). Therefore, taking loans and then, in the event of a crash, repaying it for several years is not the best idea. Although I know some people personally who took out a mortgage loan for their business, but this is an exception to the rule, and they are just in those 1% of cases.
So how to attract-find investments?
All consultants always talk about the 3F rules
- 3F - family, friends and fools
This classic 3F method is relevant at all times and sounds quite simple, you need to attract investments at the expense of family, friends and then third-party people :). As simple as it sounds, this is exactly how you need to attract investments. Your relatives and friends should believe in you, in the idea and the team otherwise, and it makes no sense to start. It is this first circle that allows you to look for money on preferential terms compared to all other potential investors, and if none of your friends or relatives can give or invest you in the end, then their support always plays an important role in the future of the project.
What about miracle investors?
What about those beautiful stories, about private angel investors who are ready to give money for the implementation of the project for free? In my opinion, there are no such investors, or rather, they are not quite correctly interpreted by all the media as angel investors, but in reality, quite ordinary investors stand behind the projects, who hope to make x10 on a new project. They are professionals in their field. They search, follow teams, study the market and look out for those who succeed. I saw several startups that at the initial stage were given money in tranches, and in return they gave 10% of the capital. So, professional investors have always stood behind these transactions, they give money for % of the capital, but in 5-7 years they expect to sell the share for 10 times more and now I’ll tell you who.
To whom do investors sell their shares?
The classic option for finding investments actually lies through funds and sponsors. Large companies, funds and venture funds have thematic programs for various projects. There are many of those: Prototron, Ajujaht, Nordic Angel Fund, can even be included here EAS and so on. By participating in a competition from these companies, you not only fight for the right to receive a grant, but also attract the attention of private investors. The latter, in turn, are ready to invest, so that later the following players, funds, venture companies, and so on, buy out their share, there are usually about 5 such rounds in the life of a startup. But in order to pay attention to you, 3F will help you a lot, they will be the first will start spreading information about you.
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