Sometimes having a great idea is not enough to get your business off the ground or, if it already exists, to get your business off the ground. In many cases it is necessary will investors who believe in the potential of your project and adequately secure the necessary funds to develop your product to market. A study conducted by the Fundación earlier in the decade Merchant pointed out that 90% of beginning They ceased operations after failing to meet their original goals. According to the study, the main reason for this was not competition with other companies, but self-destruction. It can be attributed to a lack of knowledge to make the business work as well as possible when the product hits the road, or a lack of knowledge of the market or the competition. Among the countries of Latin America and the Caribbean, according to a survey by Global Entrepreneurship Monitor (GEM), For example, Peru’s business death rate was among the highest in the group of efficiency-based economies, which conducts an annual global review of the level of business activity in nearly 100 countries. The “lack of profitability of the farms” and “personal reasons” were the main reasons for the closure of the evaluated farms. However, according to the survey jewelin the case of Brazil, “84.6% of entrepreneurs are not looking for support services” starting businesses, a fact considered “extremely relevant to formulating strategies to promote entrepreneurship”.How do youso, to find investors and convince them to back your idea in a scenario like this?
According to the GEM report, in addition to the already traditional forms of financing – how to get funds from banks or funding agencies – another source is known investors informal gradually spread all over the world: “These investors are friends, relatives, acquaintances or even people who like the entrepreneur’s initiative or idea. This type of financing can be a loan – repaid by the entrepreneur – as an investment in exchange for future benefits». However, it remains an underexplored market in Latin America. The company’s survey shows that only 2.4% of the Brazilian population between the ages of 18 and 64 has invested in a company initiated by a third party. In Peru the figure was 6.2%, while in Chile, the leading economies based on group efficiency in that sense, it reached 15.6%.
Where are the investors?
According to the Brazilian Micro and Small Business Support Service (Sebrae), there are quite a few investment opportunities for those starting:
- angel investor: They can act individually or in groups and usually need two weeks to six months to evaluate a project; they invest between R$ 100,000 and R$ 1 million.
- Seed capital fund with private funds: They generally make an initial contribution between R$ 200,000 and R$ 1 million after an evaluation phase that can last up to six months.
- Seed capital funds with public capital in their composition: The evaluation period is usually between three and six months; They invest between R$ 1 million and R$ 5 million in approved companies.
If you want to find angel investors, you should know that there are some previous requirements for the deal to happen. According to the Angeles of Brazil portal, it is necessary to a innovative idea and with one Competitive advantage compared to your competitors (not just with the lowest price or the best customer service). It is also necessary to be in a niche market with the potential to make tens or hundreds of millions of dollars, which tends to alienate local ideas and focus on specific regions. Traditional companies aren’t inappropriate, but they’re not in the crosshairs of angel investors. They are also not interested in products that are easy to copy. Finally, it is imperative that a highly structured business plan and “it is highly recommended that you have at least a prototype or proof of concept of your product and if you have validated the buying interest of potential customers”. According to the Angels of Brazil, “by doing this, you will not only increase investor interest, but also add value to your business.”