How Entrepreneurs Attract Small Business Investors


Let’s imagine that you have finally found your true passion and launched a dream business only to find it near impossible to bag investments. It might also make you wonder that even though you have a solid business plan, the business is not going as expected. When it comes to giving away money, the potential investors look at every entrepreneur, and not the business idea, as an (risky) investment. It is also famously known that “potential investors tend to bet on the jockey, not the horse.”

Supporting this theory, Stanford professor Shai Bernstein conducted a study focusing on identifying the specific “start-up characteristics” that can be considered crucial to investors in early-stage/new firms. According to the results of the study, investors remain mainly influenced by information regarding the founders. In most cases, the most successful and experienced investors chose to respond only to information about the member of the founding team. As a result, in order to make yourself (an entrepreneur) as attractive as possible, it is essential to understand what small business investors are looking for.

Developing a robust network

One of the first things that potential investors do is to investigate the founder or the entrepreneur. This is mainly done by researching based on your previous contacts and their overall perception you, due to fact that it is impossible to build a successful business venture inside a vacuum. Having an extensive and connected network will provide investors the confidence they need to invest in a business.

Understanding target audience

From an entrepreneurial perspective, it is paramount to conduct in depth research on potential investors. Some of the questions surround around the investor’s individuality and identifying if they have been about any previous ideas. Experts also believe that it is important for the budding entrepreneurs to interact with the investors on a personal level. Some of the recommended sources to learn about angel investors include, but are not limited to, AngelList, Flashfunders and SeedInvest.

Displaying proof of fiscal responsibility

Investors are also in the search of someone that can not only manage their financials but also provide significant returns. Hence, it is important to showcase that you have proven success in this landscape. Past wins are best tools to demonstrate an entrepreneur’s capability to make your business profitable. Adding into the mix, small to medium business investors may also be interested in an individual’s personal finances such as bank’s credit score, debt-to-income ratio, total personal assets and also the amount of money that they have invested in their own business. This is why a good financial record helps make entrepreneurs a more attractive investment.


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