Tapping Local Investors For Business Capital

Local Investors: Do you know that there are investors right in your own back yard - investors who may be more willing to invest in your business?

Overview of Local Investors:

Local investors sometimes get confused with Angel investors. But, the main difference is that Angel investors are more professional investors - those who professionally invest their own money.

Local investors on the other hand are just your everyday business owner, professional (CPA, Lawyer, Doctor, etc) or your uncle who may be looking for better returns on their money or looking to help their local community grow.

While most Angel investors are former entrepreneurs seeking to invest their own money full-time, local investors are still typically employed in their profession but may be willing to pull some out of other investments (like their 401(k) or IRA and invest in your business.

Local investors will typically be less involved in your business's day-to-day activities and invest less money overall but will also require less due diligence - making their approval and funding quicker and easier.

To better explain how your business could tap local investors, let's look at a couple of quick stories:

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Quick Success Stories

Success Story 1:
A young entrepreneur develops a new idea to revolutionize the signage industry by replacing outdated neon signs with LED based lighting technology. This entrepreneur partners with a veteran in the industry who has contacts with LED manufacturing in Asia.

Needing to raise money to get this venture off the ground, this new business owner returns to his home town of about 90,000 in population (small by city size) and raises $1.4 million from 19 local investors - most of who tapped their 401(k) or savings accounts and contributed small amounts averaging between $25,000 and $50,000 each).

Success Story 2:
After 20 years of working in a national restaurant franchise, starting as a dishwasher and rising to general manager (holding every job in between), a would be entrepreneur decided that he wanted to own his own franchise.

But, the franchise required nearly $700,000 to purchase the license and buy and build out the location. Plus, all potential franchisees had to have over $1 million in net worth to ensure that, should the business need additional financial help in the immediate future, it would be readily available.

Not being able to meet either of these requirements, this potential entrepreneur turned to local investors. He put together a group of 4 local doctors (doctors who were still employed in their profession - working for the local hospital). These doctors, as partners, put up the $700,000 to purchase and build out the franchise and combined, held the net work requirement.

While we kept names (individual and business) out of these examples, do know that these were actual entrepreneurs who found their success by tapping local investors.

Now, these investors were, for the most part, not professional investors and many times these investments were the first time these individuals attempted anything of this magnitude.

But, these investors had a need (be it to give back - like the Doctors or to hopefully earn a little more in the long-run from their investment - like the LED investors) and found a vehicle to do it via these new promising businesses.

Plus, these types of local investors are more likely to invest in common businesses like restaurants or dry cleaners - true local businesses with one or two locations as opposed to more professional investors who focus only on technology companies or only in industries from which they came - companies that need to be national or international companies to meet their investment requirements.

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Finding Local Investors

It is all about networking!

Networking for investors is essentially marketing you and your business; but not marketing it for customers - but marketing it for dollars.

Your business would not waste money on marketing campaigns that do not target your identified customers and thus your networking should not waste your time by focusing on the wrong group of investment individuals.

3 Ways to Network For Local Investors:

1) Join Influential Civic Groups:
Many of the biggest names and potential investors in your local area probably belong to the largest and best local civic group.

They join these groups to network themselves, to socialize with others like them and to boost their egos - the civic part comes second.

Look to Rotary Groups or Lion's Clubs.

If your targeted group of investors are members of these clubs and are active, then you should be there as well.

2) Join Non-Civic Groups:
There are other groups that these same influencers may be a part of. Like local bicycle clubs or groups, boating groups or even groups for the arts.

Again, if your targeted market is there - then you should be there also.

3) Volunteer With Local Business Groups:
Become an active member of your local Chamber of Commerce or a local revitalization committee for your city. Not only will you find local investors at these groups but also city officials who can provide introductions to the investors you seek.

To really become a part of these groups and accepted, try to work your way on to their board of Directors - this way you can really profile yourself and your talents.

Do know that investors invest in people before they invest in businesses.

Plus, when you receive your investment dollars - which is the goal after all - you can drop these groups and organizations like a bad habit and get back to a full-time focus of growing your small business.

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