How to Find Investors for a Small Business?

Rarely does that 3 a.m. brilliant business idea turn into a sustainable business.

And even when it does, there’s an evident roadblock (read: Lack of funding) that will stop you from scaling or even launching your business.

You see, you may start the startup with your own money. Maybe even dip into your savings or 401(k). But at some point, scaling requires outside capital.

Exactly why you need external investors.

But the questions is where and how to find investors for your startup? And even more important, how to approach them when you find them?

Let’s find the answers with this blog post.

Make sure you’re ready to seek investment

Before anything else, the first and possibly most important question you should be asking is:

Does my business really need to raise capital? 

It’s tempting to see startups raising billions of dollars on those Shark Tank episodes. But raising money isn’t a milestone everyone should be chasing.

Those million dollars, however attractive, arrive at the cost of diluted equity, shared control, and giving someone else the power to make decisions in your business.

That said, raising capital isn’t wrong. It’s just not always the right move.

So, if your business really does need an investment, ask this:

Is my business ready to acquire investment?

Most small business owners think that having a nice (read: groundbreaking) business idea will make investors invest in their company. While the truth is, they would only win investment when they have what the investor wants.

What exactly is that?

• They have attained a product-market fit and have built a proven customer segment ready to pay for their products/services
• They can demonstrate traction, something as simple as pre-revenue growth, booked sales, and customer testimonials, to make investors believe in their business idea
• Their idea fits in an incredible market where even the average product can grow potentially
• They can demonstrate scalability, i.e., exponential growth in an extremely short time
• They have a headstrong team that can be trusted with execution
• They know their numbers and are ready to pivot until they find success

Understand the types of investors

Anyone offering capital to grow your business, through a loan, equity, revenue share, or convertible note, counts as an investor.

Understanding what each investor brings, what they expect, and where they fit in your growth stage is important. This will help you choose the right investor and investment method for your business.

1. Friends and family

Most entrepreneurs don’t need a hundred thousand dollars to get started. All they need is a small amount (a couple of thousand dollars) to launch their business ideas on a minuscule scale.

Think of the money they need to build an MVP, order some initial inventory, or keep the cash flow healthy while they figure out what works.

At this stage, traditional or private investors won’t be interested, and seeking a small business loan would get costly. That’s where the support of friends and family can help.

They can chip in a couple of thousand dollars and even more if you can win their confidence through the product and its potential. You don’t need projections, MVPs, or even a pitch deck to convince them.

After all, such investment is based on trust rather than expectations of return. However, if things go haywire with your business, there’s a risk of straining your relationship with your friends and family.

Here are some smart ways to handle this type of investment: 

• Clarify if the money they offer is a gift, a loan (with/without interest), or an investment with equity
• Build a written agreement so that there’s no misplaced expectations
• Ask if they require regular updates or financial reports to see how their money is being used
• Don’t overpromise timelines or deliverables just because you need quick access to funding

2. Angel investors

The investment from angel investors isn’t limited to capital.

Yes, money is an important part of the equation. 

However, these investors bring along expertise, industry knowledge, and experience in building successful businesses—something that’s an invaluable goldmine for fairly new entrepreneurs.

Now, investors won’t be investing in just any “good enough ideas. They would be investing in founders who have validated their business idea. In businesses that can grow exponentially with the right capital and a bit of guidance.

If your business fits that equation and if you can convince investors, their investment can be the best source to grow your business.

Now, here are some smart ways to approach angel funding: 

• Demonstrate traction—can be something as simple as primary market research findings, pre-registered users, or hiring of a key position
• Be very specific with your funding ask and explain how their funding will fuel growth
• Be specific about the kind of involvement you’re open to, i.e., some angels want to advise, others prefer to stay passive
• Decide upfront how much equity you’re willing to offer, so you don’t end up agreeing to terms you’ll regret
• Ask them to introduce you to potential partners, early hires, or future investors

3. Venture Capitalists (VCs)

Venture capital firms invest in businesses that can rapidly go from traction to exponential growth. More often than not, businesses that have the potential of going public or being acquired in the next 5-10 years.

The very motive of these potential investors is to get 10- 100X ROI on their investment in a short time. And that only happens when your business shows signs of becoming a category leader.

Now, getting VC firms to consider investment opportunities in your business isn’t easy.

Even when you tick off all the boxes and have all the documentation sorted, you may have to face hundreds of rejections.

However, when they do invest in your business, expect a detailed legal contract. The one that specifies terms about liquidation preferences, anti-dilution rights, and expectations around board control or future rounds.

Here’s how you should be approaching venture capital funding: 

• Get your documents and background check in line—they will check everything for due diligence
• Predetermine a cap for your business valuation—the terms you’re comfortable accepting and the ones that are non-negotiable
• Only approach VC firms that invest in businesses at your stage, in your sector, and within your geography—alignment matters
• Understand how the investment will be disbursed, and if there are any restrictions on how that capital can be used
• Clarify every term, even if the contract feels intimidating, and if needed, bring legal support to your side

4. Crowdfunding

Crowdfunding is a method of raising funds from a large number of people, potentially your customers or other small businesses, in small amounts.

Here, you build a crowdfunding campaign on platforms like  Kickstarter, Indiegogo, Republic, or SeedInvest and start raising money.

What’s the catch for people offering money? 

They get a small equity or reward against their investment. It could be early access to your product, a discount, a limited-edition version, or some other perk tied to your offering.

Not only does crowdfunding give you access to desired funds, but it also validates your idea and acts as real proof of market interest.

The only drawback? You have no idea how long it would take to raise all the money you need.

Here’s how you should approach crowdfunding for it to remain effective: 

• Focus on your narrative and the problems your business solves—it’s often your story that will make people invest
• Be prepared to spend ample on marketing to stand apart from thousands of other crowdfunding campaigns
• Evaluate if the crowdfunding platform has any platform fees, legal setup, and post-campaign obligations
• Determine the reward type and deliver what you promise

5. Incubators and accelerators

While startup programs by incubators are designed for early-stage startups, accelerator programs are designed for established startups seeking rapid growth.

While both programs offer some sort of funding, it’s the mentorship, guidance, and resources they offer that make them very useful for entrepreneurs.

These programs often run on a fixed schedule and location, last a few months, and end with a demo day. On this day, you get to pitch the investors and maybe win a chance to secure funding.

And while getting into these programs offers enough exposure to put your startup on the radar, getting accepted is extremely competitive.

Here’s how to make the most of incubators and accelerators:

• Know that most incubators and accelerators take 5-7% equity
• Choose programs that align with your industry and stage of business
• Research and apply early to these programs as spots get filled up fast
• Don’t make funding your only goal—the guidance and business relationship you build can be just as valuable
• Enter with a clear growth business plan—these programs reward pace for their time-restrictive nature

6. Traditional bank loans

If you’re not willing to give away equity, traditional loans or loans by the Small Business Administration (SBA) should fit your needs.

However, to be eligible for traditional loans, you require collateral and P&L statements showing consistent revenue for at least 3 years. Meaning, pre-revenue businesses would not qualify for a traditional loan.

Although you can apply for microloans and 7(a) SBA loans, you can qualify for loans up to $50,000 without collateral.

Here’s how you should be approaching traditional bank loans: 

• Keep your business financial statements, tax records, and registration documents organized and up to date
• Have a clear plan for how the funds will be used and how you intend to repay the loan
• Build a strong credit profile—aim for a personal credit score of 750+ and maintain solid business credit
• Prepare a comprehensive list of business assets that could be used as collateral

And these were the 6 different types of potential investors you can approach to gather funding/capital for your business. Depending on your personal financial situation and your needs, pick an investor type that can benefit your business.

Where to find investors (based on their type)

Now, where exactly do you find investors for your business? Especially, if you are choosing angel investors, crowdfunding, or VC firms.

Let’s understand:

How to reach out to investors

Once you figure out the type of investors you need and where to find them, comes the most important question: How to reach them?

Well, here are a few things you should do to ensure your outreach stands out and leads to a real conversation:

1. Research your investors

Investors follow a pattern. They invest in businesses at specific growth stages (pre-seed, growth), in specific industries, and with business models they understand.

Instead of approaching every investor on your list, evaluate their portfolios first. See what kind of companies they have invested in and make sure there aren’t any of your direct competitors in their portfolio. That would create a conflict of interest.

You can also reach out to the founders they have funded and ask about their experience. This would give you first-hand insights on how that particular investor operates.

2. Use warm introductions

Network proactively and attend as many industry events, trade shows, and founder meets as you can. Build relationships and look for someone in your circle who can introduce you to the investor you’re targeting.

Another way is to build your personal brand on networks like LinkedIn and X.

Talk about your business and share progress in the form of milestones—product launches, user growth, partnerships. Build visibility and engage with investors showing interest in your space. This makes future outreach warmer and more relevant.

3. Write a strong cold email

Referrals are important. However, that doesn’t make cold outreach redundant. Especially if your cold pitch oozes relevance for investors.

Don’t send the same templated email to every investor. Take some time out, build a personalized email, and talk about why you want to secure a partnership with them.

Show them why your business is a brilliant investment opportunity and leave your contact details for them to get back.

4. Include your pitch deck

When you send that cold pitch mail, send along your pitch deck. The one that clarifies the value proposition for your investors.

This way, your email won’t just introduce you but give investors sufficient information necessary to take the next call, i.e., whether to contact you or move your pitch to the bin.

In case you are attending investor meetups, prepare an elevator pitch that can help you pitch investors instantly.

Need help securing funding for your business?

With that, you now understand where to find investors, how to approach them, and most importantly, what type of investors are necessary for your business.

As apparent from the blog post, a good enough business idea isn’t sufficient when it comes to winning investors. You need a solid team, a rewarding market, a product-market fit, traction, and most importantly, a solid business plan and a pitch deck to make your idea lucrative for investors.

A harsh truth? Winning an investment isn’t easy.

A comforting truth? You don’t have to do it all alone.

At Upmetrics, we have helped founders from across diverse industries raise over $500M to plan, launch, and grow their businesses. We don’t claim to know it all, but when it comes to business planning, pitch deck creation, financial planning, and strategic outlining—we know it a bit better than the rest.