As the old saying goes, it takes money to make money. Sure, your small business owner clients can bootstrap their new business to a certain extent. However, when it’s time to scale and make substantial investments in property and/or personnel, in most cases, outside capital has to be acquired. And truth be told, many of the entrepreneurs you know simply don’t know how to get their hands on the capital they need.
On the flip side, investors are always looking for ways to grow their portfolio. Problem is, they don’t always know where to find the people that have ideas worth investing in.
This is where you come in.
Your database is your most powerful asset. Take a good look at it and you’re likely to find at least one contact that makes their living off of investing in other people’s great ideas. Look again and you’ll probably come across quite a few small business owners that could really benefit from an introduction to a venture capitalist, angel investor, peer-to-peer lender, banker or personal investor that you know.
Now, think about this: how would it impact your professional reputation if you made a point to regularly tap into your network and make introductions when appropriate?
We’re pretty confident this could change everything for all three of you. Your entrepreneurial clients will get the cash they need. Your investor clients will get the opportunity to sweeten their portfolio. And you? Well, you’ll look like a superhero for making the introduction. And simply put, everyone loves superheroes.
Perhaps the best way for you to capitalize on this opportunity is to start by educating your entrepreneurial clients on the various types of investors they can partner with and then to share some key information they should keep in mind when considering these options. A summary like this one, will suffice:
Venture Capitalists – Venture capitalists rarely invest in start-ups. Instead they look for opportunities to partner with companies that already have a proven model. Typically venture capital is reserved for deals that are 7 figures and beyond. In most cases capital is exchanged for equity, royalties and/or control.
Angel Investors – Angel investors are typically wealthy individuals who believe in your idea. Sometimes they are more experienced entrepreneurs who act as mentors and advisors to the business owners they invest in. They typically invest money in exchange for stock in your company. Angel investors can cash in their shares at any point; however, most make long-term investments that grow as the company grows in value. In some cases, angel investors only require a percentage of return in exchange for some upfront cash. From what we’ve seen, angel investors tend to follow their instincts when making investment decisions and often they invest more in a person than an actual product or service.
Peer-to-Peer Lenders – This is something typically arranged through an online third party website. The website connects small business owners with individuals who are looking for investment opportunities. The owner and lender negotiate an investment rate and payback plan and then the investor sends the funds to the entrepreneur.
Bankers – A bank loan is very similar to other types of investments except that you deal with a bank instead of an individual or an organization. Before receiving a loan, the business owner is required to present a business plan–something other lenders don’t alway require. The plan must include a thorough description of your business prospects and the product or services being offered as well as financial projections and a plan for implementing your goals. If the bank determines there’s a viable opportunity, they’ll make an offer to fund your business.
Once you’ve created your summary, share it via the format of your choice—email, snail mail, blog post…you get the idea. When you’re ready to kick up to the next level, consider hosting a meet and greet party where you bring together the investors you know and the entrepreneurs that have the ideas they need to know about. And when you’re ready to really play your cards right, consider opening this up beyond your personal network. Invite your favorite financial advisors to share this event with their clients and so on and so forth and your once small get together might just turn into the networking party of the year!