How to Find Personal Investors for Small Business – 3 Types of Investors You Need to Know

Every small business owner knows that running their company almost feels like they’re running a small country. There are so many different things going on, so many facets of the business to manage, and for some reason, there never seems to be enough time in a 24-hour day to do it all!

The biggest challenge of them all is, no doubt, funding. That’s right, between cash-flow issues brought on by slow-paying clients, and the need to scale your company to meet the growing consumer demand, your business never seems to have enough money to do it all.

And, let’s not get started on bank lending. If your enterprise is in its infancy stages, well, that’s just out of the question. There is, however, another option available. Have you considered approaching personal investors for small business?

If this sounds completely foreign to you, then you’ve come to the right place. This guide explores 3 types of investors you need to know.

Type 1: The Conservative Investor

The majority of investors typically fall into this category. Maybe you’re one yourself. A conservative investor is an individual who wants to put their money in an investment vehicle that’s guaranteed to make them money but, without the risk of losing their principal investment.

They need to be 100% certain that, regardless of what happens, their principal investment in your business will remain intact, should they ever wish to pull out.

The profile of a conservative investor is usually someone older who has accrued a sizable investment portfolio throughout their lifetime of working and investing. More often than not, as these individuals get closer to retirement age, they tend to shift the bulk of their portfolio into more conservative investments.

They have low risk-appetite and are not usually willing to gamble their life savings in anything where an economic downturn could potentially wipe out their entire investment overnight.

They could also be young people looking to dip their foot into the investment pool without diving all the way in.

Conservative investors don’t typically invest in startups or small businesses that are still in their infancy stages. If that’s the level where your company is at the moment, you’re better off finding another investment source.

However, if your enterprise is more established, and has a proven track record of longevity and profitability, it may be possible to convince a conservative investor to put in some money in your company.

It will, however, be much more difficult compared to the other two available options. But you stand a better chance if that individual is a close family member, friend, or someone who knows you on a personal level.

Type 2: Angel Investor

They’re not called “angels” for nothing. These are usually high net-worth individuals, who have a higher risk appetite than their conservative counterparts.

They invest in companies that are in their infancy stages. They usually have the capital, network, resources, and expertise to invest in a startup that looks like it has the potential to grow into something truly spectacular like Facebook or Uber.

Contrary to what you may think, angel investors are very picky when it comes to choosing which companies to invest in. They look for ventures that are guaranteed to give them high returns on their investment, which means that the business model needs to be airtight.

When an angel investor invests in your company, they usually use their own capital and will own shares in the company. They provide enough money and resources so that no other investor joins the party down the line.

They also actively participate in the day-to-day running of the business and will expect to have a voice in the decision-making that goes on to push the company forward. Giants like Apple and Amazon all draw their roots in angel investment.

Here are the top six things that matter the most to angel investors before they can consider investing in your business.

1. The passion, commitment, quality, and integrity of the company’s founders
2. The market’s “need” that’s being addressed by the business. It needs to be an opportunity that provides the potential for the company to grow exponentially
3. A well-thought-out and detailed business plan with early signs of gaining momentum
4. Evidence of innovation, unique technologies, and valuable intellectual property
5. An objective valuation of the company with investor-friendly terms

Angel investment is somewhere in the ballpark of $25,000 to $100,000 on average, although it can be higher.

Type 3: Venture Capitalist

Whereas an angel investor comes into a company that is in its infancy stages, venture capitalists come in when the business is expanding, and perhaps venturing into riskier territory.

They don’t use their own money to invest in the business. Instead, they use the pooled resources of other investors to buy shares in the company in question.

That is not to say that a venture capitalist can’t come into a company when it is still in its infancy stages. They can, but it’s rare.

If this is the type of investor you’re looking for, they’ll need to see that your business has a solid management team in place, and already has a proven track record of success.

Here’s what a venture capital fund manager may want you to do before they decide to give you the investment you seek.

1. Quantify the market problem you’re solving and explain the unique solution you’re offering, alongside any related technologies
2. Have a solid and credible business plan that displays the vision for your company over the next 5-7 years
3. Candidly outline the strengths and weaknesses of the management team you have in place
4. Provide competitor and customer analysis
5. Explain your intellectual property strategy
6. Justify the amount of capital you require and what you’ll use it for

Venture capitalists typically invest larger amounts of money. It could be anywhere from $500,000 to $100,000,000.

Where to Find Personal Investors for Small Business

Now that you know about the three main types of personal investors for small business that exist, you’re probably wondering where to find them.

For starters, you can approach your friends or family for funding. You could also go online to search for angel investors.

The third option would be to connect with government-backed venture capital funds like VC Limited Partnerships, Early Stage VC Limited Partnerships, and several others. Be prepared to do what it takes to get the funding you need to grow your company.

In the meantime, use our online tool to find and compare unsecured business loans from any of the 70+ non-bank business lenders registered on our platform. Grow your business today, and watch it soar to new heights.