How to get friends, family, and your network to invest in your business
Seed funding from friends, the community, and family is a great way to get your small business started and often a common route for those just starting up. However, that doesn’t mean it's always easy. For some it can be unnerving to approach these close connections and ask for investment. In this article, we'll go through reasons why you should pitch your business idea to friends, family, and your network as well as many ways in which you can approach the pitching process. Let's dive in.
Why you should pitch your business to friends, family & network
They know and trust you
The most important reason to pitch your business idea is that friends, family, and your network are the people you know best. They know what kind of person you are both personally and professionally, so they have a better idea of whether or not they believe in your ability to achieve success with your business idea.
They can be evangelists for the company
Another reason for pitching your business idea to friends, family, and your network is that they can be great evangelists for the company. There are countless stories of people pitching their businesses to friends and family only to find out later how much these early supporters helped spread the word about the company. For example, Subway founder Fred de Luca borrowed $1,000 from his friend Peter Buck to start the sandwich chain back in 1965. Today, Subway has over 44,800 locations globally and brings in an estimated $16 billion in annual revenue.
Although you might not become as big as Subway, pitching to friends and family can be a great way to spread the word about your new business and get it off on the right foot. You never know which of your friends might be business-savvy and start pitching the idea to their own contacts.
It provides proof for other investors
Pitching your idea for a business to friends, family, and the network and having them as initial investors is also a great way to prove you have what it takes to pull off the new venture to other potential investors. If you go to other people pitching your idea for a business and they can see that you have already gained significant support from those that know you the best, this helps give them confidence in your abilities as an entrepreneur.
It builds up the community
Lastly, pitching your business idea to friends, family, and your network is not only great for you but it's also beneficial for the community at large. Friends and family rounds, as they're often called, help build up the community around a business idea. In a way, having your family, friends and network as your initial supporters works as a domino effect - once one person invests in your business, others are more likely to follow suit, often within their direct community, forming vital connections for your growth.
Remember, small businesses are the lifeblood of local communities, and doing business with local businesses provides numerous benefits. Supporting small businesses creates more local jobs and in turn, creates more business ownership. It also reduces the environmental impact by 26%, increases nonprofit donations by up to 250%, and ensures better public services. For every $100 spent locally, at least $58 dollars will recirculate in the local economy. In short, pitching your business to and garnering support from your closest networks benefits both you and them.
How to pitch your business idea for investment
Have a pitch ready
When pitching your idea for a business, remember that pitching just features and benefits is not always exciting enough for people to want to invest. Instead, pitching the value proposition of how your business will have an impact on society in some way is often a better way to get people to invest in your business.
Be ready to talk about your project in depth, the investment terms, and explain both in detail to people. In addition, have follow up material to send to them so they can do their own research. A pitch deck or your Mainvest profile gives you something for people to review on their own time and get back to you with any questions or concerns.
Identify potential investors in your network
Start by building a list. Think about who might be most interested in investing in your business. Do you have any connections in the industry or know anyone who has invested in a business before?
Don’t reach out to someone that you haven't talked to in a long time and ask for investment right away. Spend the time to catch up with them first, update each other on your lives, and, then, maybe mention your project and how they came to mind when looking for potential investors.
Ask for feedback
Before asking for investment, ask for feedback. Pitching your new business idea to a person who can potentially benefit from the product or service you are pitching is a great way to get feedback on how to improve it. Oftentimes, taking this feedback into consideration and coming back to the person with a business plan that implements their ideas can increase their trust and confidence when considering investment.
Always be pitching
When starting a business and looking for investment, you should constantly be pitching your idea to anyone who will listen. Attend pitching or networking events, talk to people you meet out in the public, and always have your pitch ready. You never know who knows a venture capitalist or other potential investor until you ask them.
When pitching your idea over and over, not only do you get better at pitching it, but it also keeps the opportunity fresh in people's minds if they've already heard of it. In this way, pitching becomes its own form of marketing.
Make it clear how a potential investor can invest in your business
If you tell a friend or family member about your business and they are interested, make the process as easy as possible for them to invest. Using a platform like Mainvest allows you to link them to a page where they can invest directly. Don't leave potential investors chasing down an opportunity.
It's also a good idea to have a clear message of how much investment is needed and why that amount is required for the business to scale or succeed. Have a breakdown of how the investment will be used - including timelines and purposes, so that everyone you talk to has an idea of what exactly they are pitching into. By using Mainvest, potential investors will be able to see all of this information transparently on your offering page. Check out some examples in our funded gallery.
Get used to hearing no
As with any investment opportunity, it is likely you will hear some no's. While it may be harder to hear from those closest to you, it could indicate there is room for improvement before reaching out to the general public. Use every no as an opportunity to learn and improve your business. Always ensure to potential investors that saying no is ok but, in turn, you would love their feedback on how to improve in the future.
Keep people updated on the progress of your project
Keeping both investors as well as those who may not have been initially interested updated on the progress of your project could lead to investment from those who originally said no and reinvestment from current investors. A great way to keep people updated on where your project is in its lifecycle is by using social media on a daily basis. Provide even the small details, such as the installation of a sink in your kitchen, the beginning of build out of your warehouse, or longer status updates once a week can gain you investment traction. When using Mainvest, you have the additional ability to post updates on your platform that go to everyone who has invested or is watching your campaign. People love to keep up-to date on how their money is working in real time.