If you are a US-based entrepreneur looking to start a new business, you will need to consider a variety of aspects concerning the launch of your venture in the beginning.
Whilst you may have produced a promising idea for a business, are you sure that it is commercially viable? Often an innovative idea alone is not enough to make a business successful. One of the best first steps you can make is to conduct a competitive analysis into the marketplace. This will help you understand if the business is actually viable. You will need to know the answer to questions such as, what is the competition like in your town or city? What about at a state or even national level? What about the overseas market outside of the United States? Will the global arena play a part, and will competition from businesses based outside of America cause issues? Understanding the answers to these questions will help you decide whether you can be competitive or not.
Once you have decided to launch a new business in the US - and have come up with a great idea which you believe will work, after conducting the competitive analysis, then one of the next steps that you will need to look at is how you will be raising finance for the business. Many new businesses fail at this hurdle simply because they cannot generate enough finances to launch effectively.
Working out how you are going to finance your business start-up can be an arduous process as there are a number of different ways of raising capital for businesses. Do you borrow money off friends and family and risk causing a family rift if your business fails? Or do you put all your own money into the business and risk losing all your money? Many entrepreneurs are not comfortable with either of these options past a certain point.
Typically, the money (also known as seed capital or venture capital) that is used to carry this out can come from a number of funding options and several types of investors. For entrepreneurs that want to avoid using all their own money as seed capital, or borrowing money from friends and family, a more attractive option is to look for outside business investors.
It has also been known for some business owners to fund their business on their credit card in the beginning. Due to the high interest rates typically associated with this kind of credit, and the fact that the amount of money that you can borrow is typically quite low, this option isn't recommended since it can impact cash flow as you will need to repay the money on top of your existing business expenses.
Some more established businesses may also be able to get financial investment from venture capital firms and traditional lenders such as banks via small business loans. However, this type of funding from venture capitalists can be hard to gain for most brand-new companies and start-ups. In short, traditional lenders and investment firms prefer to give bank loans to established companies, not those looking to launch new ventures since these companies are a higher risk and lenders tend to prefer to see a company that has an established history.
For certain companies or business ideas crowdfunding platforms might be an option, using kickstarter campaigns. Crowdfunding sites can connect you with people who want to invest in your business, but this involves quite small amounts of money and donations and suits certain kinds of new business idea such as product launches and fundraising for community projects. This type of investment can take the form of equity crowdfunding where many individuals invest in a business in return for some equity or shares in that business. Larger scale projects tend not to work well via these types of funding methods as they cannot always generate a lot of interest or money.
Some business owners have also found success raising capital by searching for investors on social media platforms such as LinkedIn, but this is a rare occurrence, time consuming and hard to achieve since this social network is more for business networking and not investing.
It is also worth looking to see if there are any governmental, state or city-based schemes or incubators, open to local businesses. These tend to be for certain types of company and there can be a lot of hoops to jump through to get any finance from this kind of scheme. Depending on what state or city that you are operating in you might find that there is a local scheme that can provide some funding.
Angel investors are types of individuals who specialize in investing in small businesses and start-ups. This type of investor can provide a lot of benefits and advantages to entrepreneurs with a good business idea that they are looking to get off the ground. Not only can angels provide business funding in return for a share of the equity of the business, but often, an angel investor will bring their experience, advice, and mentorship to the partnership.
For the small business owner, looking to outside for potential investors and high net worth individuals, angel investors may be the answer, but there will be several criteria small business owners will have to meet to attract this form of business financing from angel investors. Firstly, that means your early-stage business idea must make financial sense on paper and all the sums must add up. This will show that the business model has the potential to be profitable. To demonstrate this effectively, you will have to put together a strong business plan which presents your business idea clearly and shows how you will use any investment capital that you receive.
If someone is going to invest in your business, then they are going to want to know what sort of chance it has of success, and they will want to know how you are going to spend their money to launch your new business. So, expect investors to conduct due diligence to ensure that you offer a sound investment opportunity. You should also take time deciding if you really want to accept investment into your business, since you will want to have a partnership with a private investor that is a good fit. Selecting the right investors for your business is paramount to its long-term success.
Angel investors can be locally based, or even can be from overseas. So, if you are running a business in the United States that has a global reach, an investor with experience with the overseas or global marketplace might be beneficial. Whereas, if you are focusing your product or services at a state level, or nationally in the United States you might prefer to seek investors based in the US as a preference.
Some investors like to invest in the town, city, or state that they are located. Often entrepreneurs looking to operate a business in a specific marketplace such as New York or San Francisco will turn to local business investors. Local entrepreneurs therefore will need to make connections with other local business people and business investors. This can be beneficial if the investor is taking a more direct role within your business since you can meet up more effectively.
However, some investors do not want much of a role within the organization apart from funding it. In these cases, it can be less important where the investor is based, so US entrepreneurs could then consider investors all over the world as potential partners. When it comes to angel investing, there is a lot of choice and options available to both the investor and entrepreneur alike.
Whatever investor a business owner looks to entice with their business venture, the entrepreneurs looking for external investment will need to present to these angel investors a comprehensive business plan, which will map out the new business precisely. Potential business investors will need to make an investment decision based on the data that you have researched and put together, and without this comprehensive plan, it can be hard to find anyone that will want to invest or take you seriously as an entrepreneur.
In many cases, once the partnership has developed further and once the planning and market research phase has been conducted, many start-up businesses will require an extra, second injection of investment from their business investors to take their business to the next level. This can also occur when an entrepreneur wants to expand the businesses reach, perhaps from a state-wide level to national across the entire US or even further afield. Often, extra investment may be required from the angel investor to facilitate this once the business has proven itself as a viable concern.
Typically, when an investor decides to invest in a business, they are looking for either a share of the overall ownership of the business, or they are looking for a cash return on the investment that they have staked. Therefore, as an entrepreneur you will need to decide whether you are comfortable with losing a part of your business to a third party, or if you would instead prefer to repay the investment you received with a share of the profits instead.
Either way it is important to ensure that you get a concrete legal contract in place as this will protect both you and the investor in your business. Ensuring that you have a proper contract will also save you time, effort, and money if problems do occur.
The last thing you need when you are trying to launch a new business, is to have to devote time to things beyond the product and idea. Ticking these boxes will ensure that when you need to raise finance for the business then the process is as painless as possible.
This is where the Angel Investment Network can help as it is online platform where entrepreneurs can connect with business investors in cities around the United States and further afield. With branches of the Angel Investment Network operating in over eighty countries entrepreneurs in the US can take their business idea globally.
Entrepreneurs can simply sign-up to the Angel Investment Network to include their business idea on our platform, to help attract finance from US investors and from angel investors from around the globe. Add your business idea to the Angel Investment Network and start connecting with potential investors today.
AIN helps investors and entrepreneurs build lasting and profitable relationships to build better businesses and brighter futures.