Running a business is about more than just money. Getting funding along with the support of a knowledgeable investor is often better for you and is possible if you partner with an investor. Investors are typically wealthy individuals who invest their own money into a small business in exchange for ownership of part of the business.
They are motivated by the potential to make high returns on their money (in the form of sharing profits or the sale of their shares at a later stage). But they are often former entrepreneurs, who want to support entrepreneurship in general and do so by investing and mentoring other entrepreneurs.
The advantage here is that you get funding without the need for collateral and you get support – but, you may lose control of your business. If your investors disagree with the direction you want to take you may lose their support. These types of partnerships are also generally focused on high-growth business opportunities and there is a lot of competition for investors’ money.
Even if you have a fantastic product or service, it takes time for people to catch on. But while you are busy building up your client base, you still need to pay your employees, cover your rent, buy your materials, and have enough left over to meet your own living expenses.
Finding the right people to partner with requires careful research. Research angel funds and networks in your business sector, and select a model that works best for you.
Angel networks like Jozi Angels, the South African Business Angel Network and the Angel Network are a good place to start. Finding an investor can be a job of its own, but they may be an even better class of investor closer to you than you think: the next section discusses how your friends and family could be the investors you need.