When and How to Get Investors for Your Business

This article is an excerpt from the Shortform book guide to "Bold" by Peter H. Diamandis and Steven Kotler. Shortform has the world's best summaries and analyses of books you should be reading.

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Do you need outside partners for your company? How can you get investors for your business?

Investors are major players in small businesses. In Bold, Peter Diamandis and Steven Kotler express the importance of creating an open network of public members who’ll provide you with the finances and popularity necessary for your innovation to succeed.

Read on to learn how to get investors for your business.

Reach Large-Scale Success With an Open Network of Investors

Why do you need to learn how to get investors for your business to succeed? Diamandis and Kotler elaborate that a crucial step to releasing your innovation with high credibility is to capture public attention through excellent advertising and press coverage. This will allow your innovation to reach as many people as possible and achieve true success—the ability to change the world in some way. However, the necessary publicity requires more funds than your closed network members can provide—hence the necessity of open network members who’ll invest in your cause.

Are Investors Necessary for Large-Scale Success?

In Rework, Jason Fried and David Heinemeier Hansson claim that instead of seeking an open network of investors to fund the final stages of your product release, you should actually avoid outside funding altogether. Gathering outside funding comes with strings like having to please investors rather than customers, and they claim that it’s very possible to successfully launch your product without outside funding.

Fried and Heinemeier Hansson suggest the following methods to successfully publicize your innovation without outside funding:

1. Get free advertising by posting blogs, tweets, or promotional Instagram videos online. 
2. Teach people about your business or industry for free. People who are interested will also likely become supporters of your innovation.
3. Show people how your product is made by giving tours of your “factory” or creative space.
4. Avoid press releases. The media usually ignores them. Instead, personally write to journalists who might be interested in explaining why your company would make a good story.
5. Choose small media companies in your niche area over big media companies who’ll likely ignore you.

When to Recruit Your Open Network

Diamandis and Kotler state that you should start recruiting open network members when you meet the following criteria: 

1) You have a solid closed network of members who are willing to help you. You’ll need further support while running your campaign to recruit investors. 

2) You’ve completed the majority of your micro-goals and have sufficient credibility. This credibility will be important when convincing people who don’t know you that you and your innovation are worth supporting. 

3) You have a draft model of your innovation and are close to completing the final model. People need to have an idea of what exactly they’re supporting before they commit. 

(Shortform note: Some experts agree that a strong team (closed network) and high credibility are necessary before seeking outside funding. However, they argue that having a prototype at this stage isn’t always necessary or possible—especially if your prototype is expensive and you need outside funds to build it. In this situation, you’ll need two additional criteria before seeking investors. First, you must be able to show investors that you have skilled team members with talent and experience in the industry (not just a supportive team). Second, you must provide an exact time frame indicating how long it’ll take for you to build a deliverable prototype.)

Creating an Open Network

The authors explain that a proven, reliable way to recruit open network members is to start a fundraising campaign where each investor receives a small return for their contribution—this strategy is called reward-based crowdfunding. For example, if someone contributes $25, they’ll receive a sticker, and for $50, they’ll receive a bandana. 

This technique is beneficial because it tends to attract people who are truly interested in your innovation or purpose, and offering a reward provides them with a deeper connection to your cause. As a result, these supporters are likely to be regular contributors to your cause—either through further investments, by becoming customers, or by spreading the word about your innovation and increasing its popularity. You can recruit these members by posting your campaign on crowdfunding websites such as Indiegogo or Kickstarter

(Shortform note: Some experts agree that reward-based crowdfunding is a great way to attract individuals who’ll support your product before and after it’s released. However, it can arguably become more expensive than originally planned due to hidden costs like taxes, packaging materials, shipping costs, and so on. To minimize these expenses as much as possible while still compelling investors to support you in the long run, experts emphasize offering unique, exclusive digital rewards over material items: for example, a digital tour of your creative space or a video explaining how the product’s made.)

When and How to Get Investors for Your Business

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  • How to become a successful entrepreneur and maintain your success
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  • The psychological strengths needed to handle the high-stress commitment to innovation

Katie Doll

Somehow, Katie was able to pull off her childhood dream of creating a career around books after graduating with a degree in English and a concentration in Creative Writing. Her preferred genre of books has changed drastically over the years, from fantasy/dystopian young-adult to moving novels and non-fiction books on the human experience. Katie especially enjoys reading and writing about all things television, good and bad.

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