FINDING BUSINESS PARTNERS AND INVESTORS
In this topic, we will focus on the process for finding internal partners and investors. Internal partners are those who work hand in hand with you in your venture for the same goals. External partners are excluded from this topic.
Before you start searching
Before you start thinking of how to find a business partner, or, how to find investors for your business, you need to do a lot of homework, such as drafting a business plan, analyzing the market, etc.
Assuming that you have already drafted a business plan, it is presumed that you know about the different business components to take your start-up off the ground. As mentioned above, our subject will be narrowed to components related to finding internal partners and investors.
First and foremost, you need to define your value proposition, that is an innovation, service, or feature intended to make a company or product attractive to customers. In other words, you should ask yourself, what would make consumers buy your product or service, rather than your competition’s?
Once your value proposition is crystal clear, you would need to define all required activities in an organized manner to take you to a point where you can say “Yes, I can 100% provide my customers with what I promised”. Then, you would need to associate resources to each activity. Here, it starts to become tricky, because too many fresh entrepreneurs fail in recognizing their limitations. They think that knowing their business or having a plan to convert their idea to a business makes them more knowledgeable than others in completing all or major activities. The good news is, you’re not falling into that trap, this is why you’re thinking of the ways on how to find an investor or a business partner.
Now, how do you associate resources for each activity?
Before you go farther, the definition of resources you will find online is: “a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively.”
In order to stay focused on our topic, “How to get investors for a startup, and/or a partner, and how to get funding for a business”, our attention on resources will be on people and money. Does it make a sense so far? Yes? Good.
To understand easily the process for selecting the right partner and investor for a startup, let’s take an example of someone who has an idea about a good product to sell, and who did all the basic work to verify that the idea has a good chance to convert to a business opportunity.
We’ll call her Sonya.
The product Sonya offers is different than all other products available in the market. But in order for Sonya to maintain the quality of her product, she would have to:
Buy or lease new machines and operate them.
Use existing tolls she bought for another business. A business where she learned a lot, the hard way.
Hire a professional third party for the quality check considering a specific budget per item produced.
And so on…
Sonya then would define who does what and how much each activity would cost from the early stage of changing the idea to a business, to the stage beyond the break-even point.
With this information, she would have a very good idea about what resources she already has, and what she would need to run the business.
A different entrepreneur would probably start looking for an investor or a business partner at this moment, but Sonya learned from her past experience that her homework is not over yet.
Sonya needs to segregate between core and non-core activities for her business, then analyze whether it is realistic for her to perform and manage all the core activities on her own or not. If not, she would need to seek partners.
She also needs to use any possibility of bootstrapping to reduce expenses. If all options of minimizing expenditures are exhausted and the business still needs funding, then she would need to look for investors.
Let’s assume that for her business to be successful, she needs both a business partner and an investor.
So, what is the profile of the right business partner?
First, the partner has to have the skills Sonya lacks for her business. If one partner is not sufficient, she needs to find another one. It is however, not advisable to add more than two partners for founding a business.
Then, she starts looking for a common ground the prospect partner would share with her. Definitely, partners have to genuinely aim for the same goals as far as the venture is concerned.
Sonya doesn’t necessarily look for partners with the same personality. But she uses a forthright conversation style to avoid any ambiguity whatsoever. She loves to do everything in writing so nothing is overlooked. Sonya already has Company agreement, Non-Disclosure Agreement and non-competitive agreement forms ready for use. She also knows a good lawyer who takes care of business partnerships with an affordable price.
Here are the options offered for Sonya to find a partner:
Use her network and get recommendations: It is good to have someone you know very well vouch for a prospect partner. The downside of it is that sometimes the friendship takes precedence over the required skills, which hurts the business down the road.
Look for partners using social media or online search: with this approach, the niche is bigger, but it takes a lot of time and effort to find the right partner.
Use Vamaks portal: All she needs to do is to add a post in Vamaks forum with a clear skill set request and expectation from prospect partners. Then, she can interview the respondents using the private chat system from her portal. The main advantage of this option is the chance to find likeminded persons in Vamaks is very high given the fact that all members aim to provide value to others while making profit.
Being already a member with Vamaks, her choice was obvious. And after thorough interviews, she joined forces with a finely selected partner.
Although strong, this partnership still need financing.
None of the partners’ networks provides an investor to the venture. This time, their options are limited to using social media and online search, or using Vamaks.
Approaching investors online is very difficult, so they opted for Vamaks.
Being already members, all they need to do is open their personal portals on Vamaks website and start looking for the right investor. They can approach investors through a private chat system that Vamaks offers, or add a post in Vamaks forum with a clear request and expectation from prospect investors. Their request addresses the preference for the investor to know about the industry, the amount of money they need and when they need it, and the preferred type of funding. Sonya and her partner are more in favor of equity funding than debt or financing, especially with their type of business that is risky of course, but promises high returns in case of success.
Sonya is a very organized person. She knows how to convince investors to buy-in on her business idea, and has inculcated that to her partner. They both know their “elevator speech” by heart, and are prepared for any pertinent question related to their business. They have even developed a summarized version of their business plan for the more “visual” investors.
This is how Sonya has successfully completed her homework to find the right partner and investor for her business.
In few words…
To summarize, in order to find the right business partner and the right investor for your business, you need to know your business very well, identify your role in the business, make sure your partners aim for the same business goals and have the required skills to fill all the gaps in your business, know how to present your business idea to investors that have the necessary knowledge about your industry, and get the right funding for your venture. All of this should be wrapped properly in a legal manner.
Good luck with your endeavor.