A Startup Guide to Funding: How to Find Investors

Finding the right investors is crucial if you want to grow or scale your business. And while we tend to think of investors primarily as a source of funding, great ones can also provide support in the form of mentorship, resources and building relationships.

Different types of investors bring unique strengths to the table and it’s important to find the ones that match your goals. In this guide we’ll take a closer look at the types of investors and funding rounds, strategies for attracting investor interest, and how industry events like VivaTech can help startups secure funding.

The Main Types of Investors Startup Founders Need to Be Aware of

Startups and businesses often get off the ground by raising money from friends and family, crowdsourcing, or self-funding (also known as bootstrapping). But once your business idea shows potential and you know the market well, you’re ready to approach investors.

Angel investors and private investors are the two most common types and each comes with different advantages.

What is an Angel Investor?

An angel investor is typically a high-net-worth individual and they are often entrepreneurs themselves. They invest their own money in early-stage startups, usually in exchange for equity or a share of the business.

Angel Investors (also known as Angels) are often attracted to businesses and founders that they connect with personally, such as in a specific industry or location or with a purpose they believe in. The investors on the TV show Shark Tank are considered angel investors, though the sharks have a much more aggressive style than most angels.

For early-stage businesses looking for guidance in addition to funding, angel investors can be a better fit than large venture capital firms. Angel investors tend to be hands-on, acting as partners and offering mentorship, industry connections, and business expertise to help your startup grow. They are also more willing to take on higher-risk investments and generally focus on early-stage development. That said, angels usually write smaller checks than venture capital firms.

What is a Private Investor?

Private investors are individuals or entities such as venture capitalists (VCs) or private equity firms that invest in a business for a share of ownership or profits.

Venture capitalists are professional investors who use other people’s money to make investments in companies and startups. Venture capital firms may have multiple funds focused on different investment strategies or themes, such as AI or HealthTech.

Private equity firms invest in companies with high growth potential. In exchange, they usually want a significant ownership stake and a seat on the board of directors. Growth equity firms are private equity firms that focus on later-stage startups.

Private investors usually write bigger checks and are more likely to participate in later funding rounds for companies with proven business models, though some focus on earlier stages. Unlike angel investors, the amount of mentorship from private investors can vary – some firms are very involved, and others less so.

For entrepreneurs hoping to maintain a high level of control over their companies, the amount of ownership stake and managerial sway demanded by private investors may be an issue.

Funding Rounds and Investment: What’s the Difference?

When a startup seeks to raise capital from new or existing investors, it’s called a funding round. These fundraising events provide investors with the opportunity to put money in a growing company in exchange for equity.

There are typically four levels of startup funding:

1. Seed Funding
2. Series A Rounds
3. Series B Rounds
4. Series C Rounds

Seed Funding: The first official money raised by a company is called “seed” capital because it provides the necessary foundation for a startup to grow. Entrepreneurs use this money to develop their business idea. Seed funding can come from a variety of sources: angel investors, early-stage venture capitalists, friends and family, or even self-funding.

Series A Round: Series A is a company's first round of institutional funding. This round occurs once a young business has outgrown its seed funding and needs more support for early growth. Participants in Series A rounds often specialize in backing startups and may be private investors, venture capitalists, or even institutional investors such as banks.

Series B Round: Series B rounds are for businesses ready to expand past the development stage and increase market reach. Companies pursuing Series B funding are already well-established and have average valuations in the tens of millions of dollars.

Series C Round: Series C funding focuses on scaling the company, breaking into new markets, or developing new products. Investors in Series C funding rounds expect quick growth and high returns.

After a Series C funding round many companies will complete an initial public offering (IPO). However, there is no limit on the number of rounds a company can offer, and some may need more fundraising to grow.

Where to Find Investors for a Growing Business

Connecting with investors requires positioning your business as an opportunity worth their time and money. Thankfully there are more ways than ever for startups to find partners.

How to Find Angel Investors

1. Angel Networks: Platforms like AngelList and SeedInvest connect startup founders with angel investors.
2. Networking Events: Attending industry events can provide opportunities to network with potential angel investors. For example, VivaTech, Europe’s biggest startup and tech event, brings thousands of investors and entrepreneurs together.
3. University Programs: Many universities have angel networks and entrepreneurship programs that connect current and former students with alumni angel investors.

How to Find Private Investors

1. Venture Capital Firms: Private investors often work with venture capital firms to find investment opportunities.
2. Online Investment Platforms: Websites like Crunchbase connect entrepreneurs with active investors looking for new opportunities in specific industries.
3. Conferences and Exhibitions: Industry conferences and events offer the chance to make direct contact with potential investors so you can pitch them in person.

How to Begin a Funding Round

Funding rounds require preparation and diligence. Many entrepreneurs recruit the help of investment professionals or fundraising consultants to help guide them through the process.

To initiate a funding round:

1. Assess Your Needs: Gather data on your company and your goals. Determine how much capital you need to achieve those goals.
2. Prepare a Strong Pitch Deck: A winning business idea needs a winning presentation. Your pitch should include a clear vision for the company, how you fit in the market, your business model, and proof you can execute.
3. Identify the Right Investors: Investors need to be aligned with your goals. Research options based on investor type, location, and your investment stage.
4. Engage Legal Counsel: To ensure all the necessary paperwork is in order, contact a legal advisor early in the process to prepare term sheets and other legal agreements.

Ways of ‘Capturing the Attention’ of Investors

The startup world is a crowded market, so standing out is vital if you want to capture investor attention. But don’t worry, there are many ways to get noticed by those who can help you get to the next level.

1. Present a Unique Value Proposition: Emphasize what makes your business special and clearly explain the pressing problem your product or service solves.
2. Proof of Concept: Investors want to see that your business has potential. Use metrics, growth projections, and customer data to show future promise.
3. Build Relationships: Many investors prefer to back entrepreneurs they know and trust. Before pitching, consider how you can create a connection with a potential investor, such as by attending networking events or connecting on LinkedIn.
4. Storytelling: Put your personal story at the forefront of your pitch. Emotional connection can be a compelling tool to share your mission and vision.
5. Polish Your Pitch: Practice your pitch presentation in front of non-investors to build your confidence, get feedback, and make improvements.
6. Put It to the Test: Promote your business in live startup challenges at VivaTech. Competing gives you the chance to showcase your idea to investors looking for standout talent and innovations.

With the right investor information, a networking plan, and an impactful pitch, you’ll increase your chances of securing the funding and partnerships your business needs to succeed.