When you are looking into financing options for your product-based company, you may come across the term equity investor.
Equity investors may come in at the startup stage or the expansion stage of a company and can be a valuable asset to helping entrepreneurs access the capital they need to succeed.
We’ve compiled a quick guide on the ins and outs of finding and using equity investors for your product-based company. Keep reading to learn more.
What is an equity investor?
An equity investor is someone who purchases shares of a company in pursuit of capital gains and/or dividends. They may be individuals, firms, or organizations. Equity funding comes in three main types – angel investors, venture capitalists, and strategic partners.
Companies may seek out equity investors when they are about to relocate, expand, develop a new product, participate in a merger or acquisition, or undergo any other change that requires a major influx of capital.
While equity investors have no guarantee of a return on their investment, they expect that they will receive a positive return as the company grows. When the company grows, the investor’s portion of the company (shares) should rise in value. However, if the company declines in value or goes out of business – an equity investor can lose money on the deal. Therefore, there is risk involved in this type of investment, and equity investing is typically a long-term arrangement.
What makes a product brand attractive for equity investment?
In order to gain capital through equity investment, you will have to earn the trust of investors.
Potential investors look for the following:
- Financial return: If your product is already generating an income, this makes a brand much more attractive to investors. The presence of a steady income stream means that your product idea has been proven. Investors can be attracted by the promise of a healthy return.
- Product idea: It takes a good product to attract the attention of equity investors. But a good product is not enough on its own to make an investment worthwhile. The strategic business plan and projected financials must also be solid.
- Business plan: A business plan is important at any stage of product development, but is especially crucial during the startup phase. A well-written business plan should include elements of strategic planning such as a market analysis, executive summary, and a financial plan. Investors will want to see that you have thought through every element of business strategy from sales and marketing to personnel management.
- Financial projections: Is there a market for your product? What does the competition look like? What are your profit margins? Will you draw a salary? All of these questions are important factors that investors will look at in determining your revenue potential.
- Branding: The presence of a strong brand identity plus a strategic marketing plan also helps give investors confidence in the future success of your product.
Top benefits of attracting equity investors for your product based company
It can take a great deal of funding to bring a new product to market. Brands must factor in the costs involved in manufacturing, distributing, and marketing their new product – as well as maintaining inventory. Equity investing gives companies a way to access the funds they need.
Gaining the support of equity investors will give your product-based company the upper hand on raising capital and getting started with the inventory and other resources required to win.
Where to find equity investors for your brand
- Ask family and friends: The most basic form of finding investors for your company is to seek out support from friends and family. There are a number of ways you can offer friends and family a return on their investment if you don’t want to accept the money as a gift. You may draw up an informal agreement promising them a portion of future revenue or the return of their initial investment plus interest. Or you can offer them unlisted shares of the company.
- Private investors: Alternatively, you can look for private investors who are willing to sow into your company in exchange for a return on their investment. Private investors can include angel investors, venture capitalists, and private equity firms.
- Venture capital: Venture capitalists are professional investors who focus on investing in startups that have the highest growth potential. Venture capital typically involves giving up a significant amount of control of the company in exchange for large sums of capital. Venture capital investment is typically done through a venture capital firm.
- Crowdfunding: Crowdfunding is another popular way to gain capital through private funding. Crowdfunding is a means of sourcing funds for your business via small contributions from many different people or organizations. This type of investment is becoming increasingly common, due in large part to the rise of platforms like Kickstarter and Indiegogo. While most people are aware of donation crowdfunding and reward-based crowdfunding, there is also a third type known as equity crowdfunding. Equity crowdfunding allows individuals and companies to invest in your startup in small amounts that add up to the funds you need. In exchange, you offer the investors a portion of your equity via unlisted shares.
- Angel investors: Angel investors are people or groups who are willing to put their own personal funds into a startup. They are usually friends and family of the founder or may be fellow entrepreneurs or business leaders in the local community. Angel investors may also help provide additional assistance to your company through consulting and networking. While the amounts offered through this type of investment may be smaller, they are typically easier to obtain. Angel investors typically have limited say in the control of the company compared to other investment options.
Whether you decide to grow your business through the use of angel investors, venture capital firms, or inventory financing – having access to capital is vital to the founding and expansion of your product-based business. While you research your different financing options, be sure to build out a solid business plan, conduct the proper market research for your financial projections, and work on increasing your personal and/or business credit score.
Whatever your business dreams are – the right financing can make it come true.
How Kickfurther can help grow your product business
While equity investors can help grow your company, giving up a portion of your business or future profits may be a big downside. In some cases taking advantage of other forms of financing can free up cash flow, thus allowing you to invest in your business and eliminate the need for equity investors. Small businesses that can benefit from inventory funding should visit Kickfurther.
Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. When you compare Kickfurthers rates to other forms of funding, you’ll often see you’re saving. With costs up to 30% lower than other options, Kickfurther is ideal for inventory funding. Companies often return for additional funding. Returning companies often see rates fall each time.
Kickfurther proudly has more than $100 million in inventory funded to date, proving that they can help you get funded within a day or even minutes to hours. Kickfurther can help supply your business with the working capital it needs while allowing you to maintain full control.
Interested in getting funded on Kickfurther? Create a free business account, complete the online application, review deals, and get funded in as little as minutes!
