As a new or existing small business in Canada, you have multiple ways to obtain the necessary funding to help you with the much needed business expenses. 

In this quick guide, we will provide you steps and methods to reach out to private investors and venture capitalists in order to introduce yourself, your business model as well as your funding needs in hopes to secure the funds required.

Investors, similar to banks or government agencies, provide funding to those businesses that have a unique idea, are well prepared, can show a completed business plan and follow instructions.

Before you reach out and apply for any type of private investor funding please ensure you have the following:

• A Completed Business Plan

Having a business plan is the first step in understanding and starting your business. With a clear and detailed business plan, you are planning for your success. The quality of your business plan can shape the way private investors see you.

If you don’t have your business plan at this time, it is recommended to create one. As a member of CanadaStartups.org you have access to the Business Plan Builder Tool and the available experts who can help guide you through the process.

A detailed business plan should explain the below sections:

1. 1. 1. Explanation of the business model
      2. A detailed market analysis (customer, market, competition etc.)
      3. Marketing plan
      4. Growth strategy
      5. Detailed breakdown of the funding needs
      6. Accurate projected financials

• A PitchDeck presentation

Private investors love to feel important; and they are!

Their time is limited and every minute counts. 

A PitchDeck is exactly what private investors want to see. These are brief 10-15 slide presentations that outline the business model, the growth strategy, funding needs and share specifics of the business in a visually appealing format.

Think Shark Tank.

This is where you get to visually explain your business and attract the attention of investors. 

A properly done PitchDeck is very easy to share and is often the preferred introduction method for various investors. In addition to the business plan, the PitchDeck is the ultimate tool to acquire funding.

Do not underestimate the importance of having both a business plan and PitchDeck ready!

If you do not yet have a PitchDeck created, we recommend you reach out to a CanadaStartups.org expert who can guide you through the process step-by-step or have the creative team build a customized Investor PitchDeck for you.

How to Find a Good Private Investor

A private investor can be your neighbour, a friend, a family member – or somebody who owns a business, works with other business owners or simply has the money to invest.

Keep in mind that every investor’s ultimate goal is to make money, so just as much as you need an investor, they need a profitable business idea to invest in.

Not all private investors are created equal, and you should always do your own research into each private investor or private investment firm to understand if they are a good fit for you and your business before you accept their funds.

Many private investors are open to negotiation when it comes to the funds borrowed or their investment in your business. Each investor also has its own needs and process, so it is important that you are open to that and understand how it works.

Certain private investors want a piece of your company (a percentage of ownership, profits or revenue), some want a monthly payback while others rely on the interest of the funds provided. In certain cases, investors can also fund you now and only profit once you sell the business!

All of these factors are something to consider while doing your due diligence to find the right investor for you and your business.

How do you find a good investor for your business?

While it is important to look for investors who have the funds you need, you also need someone who understands the market, the industry, your competition and shares the same vision as you. 

While all investors may say yes to you if you have a solid idea; finding the private investor you want to work with isn’t just that simple. 

Be sure to go in knowing what you want: how much you want, what you want the funds for, what you want the investor to do. (ex. do you want them to participate or just be a lender?)

If you need advice on selecting the best private investor or private investor personality type, be sure to work with your expert at CanadaStartups to determine the best options for you and your business.

How much should you ask for?

The big question – how much money should you ask to borrow from a private investor?

While you may want millions of dollars, this isn’t going to happen.

The best option you have is to focus on how much you actually need.

Determine your expenses (what you can and cannot cover on your own) and focus specifically on the necessities. This is how much you ask for!

While some investors may be open to funding the full amount, others may only fund a portion. So, it is critical to know the investor and understand what they are looking for in order to consider your options.

In some cases, private investors love to get into the business and make a deal that unlocks the potential of more money being provided to you as and when you need it. This is a good option to have, sort of like an on-call bank loan.

Again, the most critical thing you must do when looking for funds from a private investor is go in prepared. That means, both your PitchDeck and your Business Plan should outline your funding needs: exactly how much you need, what you need it for and when you need it by.

If you require assistance in determining your startup or expansion costs and how much funding you really need, be sure to work with your experts at CanadaStartups directly.

Is a private investor right for your business?

Getting funding from a private investor isn’t for everyone.

It is important to understand that private investors are using their own money to invest into your business. This means that they are very careful with their funds and they expect repayment and success.

While no one can guarantee success, keep in mind that they are investing in you. With years of experience and knowledge, they are putting their own funds on the line based on something that they see in you – that is good news! 

If you are looking for a more “stress-free” investment option, consider working with family or friends, or using your own line of credit, credit card or even government funding as possible options.

The good thing about private investors is that many of them support entrepreneurs with their knowledge and experience in the field, this can be useful to you if you are just starting out and their advice, guidance and expertise can go a long way on top of their funds.

Depending on the business type, the earnings potential and your funding needs, a private investor may not be an option for you. 

For example:

If you’re looking to get $1,500 from a private investor, don’t bother.

Most private investors will only work with business owners who are looking at funding needs ranging from $20,000 to $50,000; $50,000 to $100,000; $100,000 to $500,000; $500,000 to $1,000,000 and $1 million plus.

If you’re looking for $10,000 to help you purchase a pickup truck to be able to take on more work, a private investor is not the right option for you.

Private investors invest in companies that show potential; not just in terms of revenue but also in terms of expansion, potential in brand recognition and as “something interesting for their portfolio”.

Be sure to work with CanadaStartups to determine if private investors would be the right option for you.

How does the process work?

The process of starting to work with a private investor can be categorized into 4 steps:

1. Introduction
2. Business Model
3. The Pitch
4. The Funds

The introduction stage is the first and most important step to ensure you can actually reach the investor. Each investor has its own preferred method of contact, so it is very important to follow this when introducing yourself. 

Please refer to the section below for more details on how to reach out to an investor and introduce yourself and your business.

The business model stage is after you’ve passed the introduction stage and have received a confirmation from the investors to send over your business plan and/or PitchDeck for review.

During this stage, the private investors review the documents and prepare any questions that they may have for you while they determine and evaluate if you and your business are a good fit.

Within this stage, it is crucial that you have your business plan and your PitchDeck ready without delay. Be sure to have both reviewed by a CanadaStartups expert before you get to this stage.

If you don’t hear back from the expert, do allow some time before reaching out again to follow up.

The Pitch stage comes when the investor reaches out to you after having reviewed your business plan and PitchDeck. If this happens, you’ve made it through the preliminary stage and your business model shows promise.

During this stage, the investors are really checking you out. 

This is where you will be asked to explain your business model, show your personal side, knowledge and experience as well answer any questions that they may have.

It is always a good idea to be prepared and understand your business model in detail!

The last stage is the funds stage. If you make it through the initial 3 steps, the last stage is the funds approval stage. By getting to this stage, you’re getting the money – you will be made an offer and it is up to you to decide what to do with it (take it, leave it or negotiate). 

If you are satisfied with the offer and if it’s what you wanted, accept it. However, it is always recommended to negotiate any deal to get a more favourable result!

How to contact private investors

If you are ready to start the process, there are specific ways that have proven to be very effective in reaching out to private investors. 

Please find some points and recommended methods listed below. It is important to note that you can always modify, adjust and use them as you wish.

3 things to keep in mind:

1. Do not send your business plan or PitchDeck before it is requested.
2. Do not forget to provide your contact information (full name, email, phone etc.)
3. Do not be annoying and unprofessional.

Keep in mind that each investor has their own preferred contact methods. These can be through phone, email, website directly, social media profile etc. Be sure to respect that and remember rule number 3 from above; don’t be annoying and send the same request via all sources of contact – pick one and stick with it.

Below you will find 3 letter templates which you can use to reach out to potential investors. 

Be sure to always start with an introduction before you send any details of your business, business plan or PitchDeck. 

If the below letter templates are unclear, do reach out to an expert at CanadaStartups to get assistance with your approach. 

Introduction Letter:

• This is the preferred first step to introduce yourself to the potential private investor

Hello {investor name},

My name is {your name}, owner of {company name}. 

Right now, I am in the process of {starting up / expanding} the business and have completed my business plan and PitchDeck, however I need financial support to take the business forward.

I see that you invest in small businesses and that we may share the same interests. {you can list a few of those here when possible}

I would love the opportunity to speak to you about my business and share my plan with you.

Please reach out to me at your earliest convenience via contact details below:

{your full name}
{email and phone}

Thank you for your time.

Sending Business Plan/PitchDeck Letter:

• It is important to only send the plan or PitchDeck after it has been requested

Hello {investor name},

Thank you for your reply.

I have attached the most up to date business plan and PitchDeck for your review.

Please review the funding needs breakdown on page {enter page number where funding needs shown}, as this is what I would need the most help with at this time.

I would be happy to answer any questions you may have.

My contact details once again are below:

{your full name}
{email and phone}

Thank you for your time.

NO REPLY – FOLLOW UP Letter:

• It is important to only follow up after 10 to 14 days without any response.

Hello {investor name},

Just wanted to follow up to my initial email on {date of first email}, contacting you regarding a potential investment request.

I have a great business plan and PitchDeck in place in a field that you may be interested in. I would love the opportunity to share 5 to 10 minutes of your time to briefly discuss this with you.

My contact details once again are below:

{your full name}
{email and phone}

Looking forward to hearing from you.

Thank you