How To Find Outside Investors For Your Restaurant

In one of my posts, I covered how to estimate how much it will cost to start your restaurant. If you need to find an investor(s) to help with your startup finances, this post will give you some tips on how to find them.

Startups tend to go with investors when they can because it’s hard to get business loans.

Investors might be friends and family, angel investors, or venture capitalists.

There is also the Small Business Administration (SBA) Loan. A loan program that lends money to small businesses, the SBA does not directly give money to small businesses; it guarantees the loan, acting as a co-signer. There are eligibility requirements, questions, and process be for being approved. To get started, contact your local SBA office and ask about lenders, or use the SBA’s LINC service that allows you to connect with potential lenders online.

Venture Capitalists money comes from very wealthy people, insurance companies, university endowments, big corporations, etc. You most likely will not use one. They are looking for significant returns and usually put up millions of dollars.

Angel Investors or informal investors is an affluent individual who provides capital for a business start-up, usually in exchange for ownership equity or some other agreed upon return on their investment. Angel investors typically give support to start-ups where risks of failing are relatively high.

Two important distinctions between them, Angels invest their own money Venture Capitalists invest other people’s money. Angel investment is much more likely to be in hundreds of thousands than in millions of dollars.

Besides the two distinctions, Ventures will be more diligent in studying the business concept and ideas before they invest. Both of them will look at your business summary, hear your pitch, then look at your business plan.

Friends and Family, self-explanatory many small startups turn to family and friends to help fund their restaurant. Many entrepreneurs bootstrap or self-finance their business. But that doesn’t mean everyone saves up their own money, opens a line of credit, or seeks a bank loan.

For some, it makes sense to ask friends and family for financial support, which is what I did. When I started Josie’s Catering my sister was my silent partner, and I borrowed money from my parents and saved money for starting Corporate Catering.

What will be the right investment approach for you?

Here are some tips on finding the right one for your restaurant startup.

How To Find Outside Investors For Your Restaurant

Part of finding the right investors for your restaurant business is to decide whether you will be on partnerships or not. Partnership option can be hard. Often, there are issues on who contributes more. In reality, whoever controls the finances usually is the one who controls the business.

Besides lending you money, the ideal investor provides more than that. Find someone who believes in your vision, understands the challenges of the restaurant business, and has the business acumen to help you succeed. Find someone who can act as both a willing backer and a wise mentor to help your business thrive.

Remember, investors are people, too. Besides lending you money, what else do you want to get from your partner? Even though you are the startup entrepreneur receiving the questions when meeting with potential investors, you should also ask them questions. Such as “What role do you see yourself having in this company?” Ask questions and research to determine what kind of investor your company needs. Knowing your investor’s level of involvement ahead of time prevents conflict in the future.

Angel Capital Association has chapters all over the U.S., along with an extensive database for entrepreneurs to search. Angels Den and AngelList provide platforms that let new entrepreneurs find and communicate with potential investors.

You have to give investors a reason to even talk to you.  Not only would you like to find investors, but you also want to find people with great business ideas and great businesses. That means that attracting an investor is a two-way relationship. They want to get to know you and what your restaurant is all about, and that means information.

Find the Dough to Start a Restaurant!

Even if you’re nowhere near ready, you need to appear to know your stuff.  Investors will have questions. You’ll need to have answers. You don’t necessarily need to have all the answers, but you need some.  It shows you’re planning and prepping and that you’re ready to find solutions.

Once you’re ready to start courting investors, angel investor networks and groups will want to hear from you.  There are venture capitalists, individual investors, banks, random people with money that like restaurants that will be willing to talk to you, once you have a plan.

Given that you don’t bring something new to the restaurant industry, the best place, and the only one to find investors for a restaurant is Friends & Family.

They are the most likely to invest in something as risky as a restaurant. Be sure it will not harm a relationship with a family member if you don’t repay; this is a good option as it is ordinarily interest-free. Borrowing from a family member can help you avoid forms of acquiring very high-interest rates. If you want to borrow from a family or a friend, make sure you draw up a budget beforehand, to see how much money you have left after paying your current living expenses.