Key Takeaways

  • Investors look for thorough research, a compelling pitch, and a clear business plan before funding a startup.
  • A strong business plan should include a detailed funding request, outlining how much funding is needed and how it will be used.
  • Tailoring the pitch to different types of investors (venture capitalists, angel investors, crowdfunding) improves success rates.
  • Financial projections and an exit strategy are crucial to gaining investor confidence.
  • Alternative funding sources, including grants and small business loans, can supplement investor funding.
  • Building relationships and networking with investors before asking for funding increases chances of success.
  • A clear roadmap for growth, including milestones and KPIs, helps reassure investors of potential returns.
  • Legal considerations, including term sheets and due diligence, should not be overlooked.
  • Entrepreneurs can find legal assistance on UpCounsel to help navigate investment agreements and funding contracts.

Wondering how to ask investors for funding? You're not alone. Persuading someone to invest in your business involves doing your research and putting together a pitch, so you'll need to tell a compelling story and share what's unique about your products or services.

How to Ask Investors for Funding

Unfortunately, many would-be entrepreneurs fail at attracting investors to help get their businesses off the ground. Before pitching your idea to an investor, you need to do some basic research. Using a pitch template for PowerPoint can help you get started, and there are various online tools available to help you create a professional-looking presentation.

Research potential investors carefully. You need to have a good idea of what types of businesses they care about so you can tailor your pitch to them. Investors want to see that you can support your business claims, so prepare a solid business plan with detailed financial projections for their review.

Start your pitch by telling a compelling story to engage your audience right out of the gate. The story should address whatever problem your business helps to solve in the current market. Share what is interesting or unique about your idea and how it solves real-world issues. It's also important to be realistic about how your product or service will break into the market. Think about your rollout plan strategically and share this information during your pitch.

An effective way to demonstrate your business’s value in the marketplace is by including a comparison slide that highlights how your offerings stand out from competitors. Include a list of competitors, along with relevant features or benefits along the top, then tick the boxes for each company offering that particular service. When your company ticks all the boxes compared to your competitors, potential investors can literally see what you're offering.

Here are a few helpful tips to keep in mind during your pitch:

  • Keep your pitch concise and easy for the average person to understand.
  • Stay away from industry buzzwords the investors may not be familiar with.
  • Be concise and get to the point quickly.
  • Be specific about your products, services, and pricing.
  • Emphasize why the market needs your business.
  • Build some credibility by sharing your relevant experience.
  • Show your projected revenue over the next few years.
  • Detail how much money is already being invested in the company, including who the current investors are and how much more money you need to reach the next stage.
  • If seeking a large amount of investment capital, let investors know what your exit strategy is should the business fail.

Remember, investors invest in people before the actual ideas, so you want to impress them. Let them know why you're the right person to lead the company and what you can offer them in return.

Understanding the Investor’s Perspective

Before you ask for funding, it's important to understand what investors seek in a business. Investors, whether venture capitalists, angel investors, or private equity firms, want to know:

  • The problem your business solves and how it stands out in the market.
  • The business model and revenue generation strategy.
  • Scalability and potential market reach.
  • The experience and capability of your leadership team.
  • The risk involved and expected return on investment.

By addressing these factors in your pitch, you can position your business as a viable and promising opportunity.

Crafting a Strong Funding Request

Your funding request should be structured and data-driven. A well-prepared request includes:

  1. Amount of Funding Needed – Clearly specify how much funding you require and why.
  2. Use of Funds – Provide a breakdown of how the funds will be allocated (e.g., product development, marketing, hiring).
  3. Financial Projections – Offer a realistic forecast of your revenue and expenses over the next 3-5 years.
  4. Equity or Debt Proposal – Indicate whether you are offering equity in exchange for investment or seeking a loan.
  5. Investor Benefits – Highlight potential returns, including profit-sharing, equity appreciation, or dividends.

A structured and transparent funding request improves your credibility with investors.

How to Attract Investors for Your New Business

Most entrepreneurs start out by bootstrapping, which is financing their endeavors through any available personal funds. Bootstrapping may involve using personal savings, securing a home equity line of credit, or utilizing credit cards. Unfortunately, your personal funds only go so far, and you find yourself having to look for outside investments to keep your business idea going.

Investors tend to like companies with proven track records. Since you're just starting out, attracting investors will be a little tricky considering you don't have an existing track record. A good place to start is to research potential investors and find those whose beliefs, missions, and interests align with yours. Finding a like-minded investor drastically increases your chances of success.

You can also attract investors by having a strong social media presence. Build up your web presence on multiple social media platforms, as well as your website.

Those just starting out should seek out lesser-known investors who frequently support small businesses. Only when your company is well established should you chase those bigger investors.

Oftentimes, your first pitch doesn't yield the results you were hoping for, but don't give up hope. Keep working and continue trying to attract investors. Learn from your failed pitches, and focus on the positive aspects of the pitch to use the next time around.

Alternative Funding Options Beyond Investors

If traditional investors are not an option, consider alternative ways to ask for funding:

  • Crowdfunding – Platforms like Kickstarter and Indiegogo allow businesses to raise funds directly from consumers.
  • Small Business Grants – Various government and private grants are available for startups in specific industries.
  • Bank Loans and SBA Loans – Small Business Administration (SBA) loans offer lower interest rates and extended repayment periods.
  • Revenue-Based Financing – Instead of giving away equity, businesses can secure funding by offering a percentage of future revenue.

Exploring these options can provide financial support without diluting ownership.

Building Relationships with Investors

Investors rarely fund businesses they just met. Building long-term relationships with potential investors increases the likelihood of funding. Strategies include:

  • Networking at Industry Events – Attend conferences, pitch competitions, and investor meetups.
  • Leveraging LinkedIn and Social Media – Connect with investors and industry leaders through professional networking platforms.
  • Engaging in Incubator and Accelerator Programs – These programs offer mentorship, exposure, and investor connections.
  • Providing Regular Business Updates – Keep investors informed about business progress, even before you ask for funding.

Establishing relationships before making a funding request fosters trust and increases credibility.

Legal Considerations in Securing Funding

Securing investment comes with legal responsibilities. Some critical legal aspects to consider when asking for funding include:

  • Term Sheets – Outline key terms of investment, including valuation, funding amount, and investor rights.
  • Equity Agreements – Specify the percentage of ownership exchanged for funding.
  • Investor Due Diligence – Expect investors to review financial records, intellectual property, and legal compliance.
  • Exit Strategies – Investors want to know potential exit options, such as acquisition or IPO.

Consulting an experienced attorney ensures your funding agreements are legally sound. Entrepreneurs can find qualified attorneys on UpCounsel to assist with investment contracts.

Frequently Asked Questions

1. What is the best way to ask for funding from investors?

Prepare a strong business plan, conduct thorough research on investors, craft a compelling pitch, and clearly explain how the funding will be used.

2. How much funding should I ask for?

Determine your funding needs based on operational costs, growth plans, and realistic financial projections. Avoid asking for too much or too little.

3. What are the common mistakes entrepreneurs make when asking for funding?

Common mistakes include lack of preparation, unrealistic financial projections, failing to explain market demand, and not having a clear use of funds.

4. What legal documents do I need when raising funds?

You may need term sheets, equity agreements, investment contracts, and financial disclosures. Consulting a business attorney is advisable.

5. Can I raise funds without giving up equity?

Yes, alternatives include small business loans, revenue-based financing, crowdfunding, and grants that do not require equity dilution.

If you need help asking investors for funding, post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.