When many people think about Funding & Securing Private Investors, usually the last thing they really think about is using this valuable opportunity to finance music careers. Most artists think of places that offer online crowdfunding, or saving their money in a savings account and taking the money out whenever they have saved enough money to cut a demo or album. So, what I am going to do, is try to break down some things, so that you can see the possibilities of raising funding from Private Investors.
Understand the Difference Between Private Equity, Venture Capital, and Angel Investing
The term venture capital is often used in conversation to mean money invested by a third-party in high-growth start-ups. However, there are several types of investors with slightly different approaches. This provides a solid overview of the various investment options that are open to high-growth start-ups. Here’s a brief summary of what you need to know:
Private Equity (PE) – PE covers a number of investment types that are usually made by private individuals or privately-owned institutions (usually a private equity firm). The money can be used to purchase a company, fund a project, or make a straight-out private investment.
Venture Capital (VC) – This is also a form of private equity, but is managed differently and is usually designed to fund start-up companies that have the potential for high growth (very popular with technology companies). Venture capitalists not only provide money, but also business planning expertise and assistance to help start-ups succeed in its industry.
Angel Investing – Angel investors are high-net worth individual investors (usually former entrepreneurs) who seek high returns through private investments in start-up companies. They provide similar start-up financing as venture capitalists but usually in smaller amounts.
Where to Find Potential Investors
If you have a good network then there’s a strong likelihood you can pinpoint potential investors via this route. So start locally and branch your search out from there. Here are some tips and resources that can help:
Look to Your Business Community – If you are involved in a local Chamber of Commerce or other small business group, start your search here. Talk to experts and business peers alike. If you are not a member of a local business group, now is the time to consider joining one. Small Business Development Centers (SBDCs) may also be able to help introduce you to local investors.
Consider Trade Associations – Most industries are represented by a trade association (yes, even the music industry), this is another great place to expand your search and meet potential investors. You can also look into national and local investing and venture capital groups like the National Venture Capital Association and the Angel Capital Association.
Talk to Your Local Entertainment Business Organizations – At the local level, the entertainment business organizations may be able to help refer you to investors in your region, or even in your state area.
Preparing For Investor’s Meetings
Securing investment requires a planned selling strategy on your part to ensure that you diligently communicate the potential of your business and that you meet the investor’s criteria.
Do Your Research – Knowing your business is critical, but you also need to know your investors. Thoroughly research both. Be prepared to answer questions about your long-term growth plans.
Fine Tune Your Pitch – Once you’ve done your research, fine tune your sales pitch based on the motivations of the investors and give them a good reason to want to invest in your business.
Lean On Your Business Plan – Your business plan is critical. Be sure to include accurate and realistic financials and market research to back up your predictions. Plan on being able to confidently communicate key “sound bites” from your plan on the fly—particularly how you will generate profit and how that will flow into your investor’s pockets. Checkout SBA’s How to Write a Business Plan guide for tips and templates.
I know that this may sound a bit ridiculous, but this is exactly what the professionals do in this business! Your talent is just a fraction, yet intricate, part of your overall business strategy. Remember that you as an artist, your CD is a product that you develop and sell, and you as the business executive, are the one that is responsible in getting that product (your CD) recorded, manufactured and sold to the general public. That’s right! It’s a business of many positions, or “hats”, that one must fill and “wear”.
Financing can be easy, but developing a successful career that will last for many years to come will require discipline, repetitiveness and persistence, not to mention, guts! But you can do this if you want this bad enough. It’s not as hard as it may seem. When you start thinking like an entrepreneur in the music industry, the more easier it will become to you. Finding & Securing Private Investors To Fund Your Music is not rocket science, but it will take a good level of commitment from you.
~The Music Millionaire
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