The Covid-19 crisis has played havoc with lives and the economy. Thankfully, the worst of the pandemic seems to be over and people can begin to get on with their lives.
However, for many this is a changing world, jobs have been lost and businesses have folded. This has fueled an increase in business startups. Startups require financing, before the pandemic many startups sought investor acquisition on a global scale and this may not be as readily available as it once was.
In 2020, global direct investment dropped by 20%, this is the largest drop since the financial crisis of 2008. Many traditional investors are still wary of investing in startups with market uncertainty still lingering and a glut of startups. Added to this there are also large discrepancies in the rates that economies are recovering, investors may not be so willing to invest in startups from regions where the recovery has been slower.
But regional investors can help fill the void. In this article, I explore the advantages of seeking regional investors post-pandemic.
Regional investor acquisition
For centuries, those seeking startup capital for small ventures would pop into the local branch of the bank and speak to the manager. There was an informality about it that seems long gone, the bank manager was given more freedom to base his decision on local economics, of which he would have a strong understanding.
Whilst this “informality” is confined to history, many of the benefits of seeking local investors remain.
Regional Investors – The pros
Seeking local investors means dealing with investors that have a deeper understanding of the local market conditions and just where your startup enterprise will fit within them. These are investors who can judge the risks and rewards of your business more capably than a faceless global conglomerate.
This personal touch can also benefit the startup through the amount of support they are able and willing to offer.
As well as acquiring investors with a deeper understanding of local conditions, regional investor acquisition also supports the local economy by keeping both jobs and capital within the region.
While these factors mattered pre-covid, they have become a larger consideration after the fact. As noted earlier, global direct investment is low and investors are wary of local virus conditions, regional investors have a deeper understanding of local conditions and are more likely to be sympathetic to your financial needs.
Regional Investors – The cons
Local markets can have volatility that doesn’t apply on a global scale, this can leave you exposed to regional changes that can affect the viability of your investors. Also, depending on the financial needs of your startup, you may be restricting yourself to investors that can fully fund your requirements.
Attracting investors from global sources can also help promote confidence in your endeavor as a feasible prospect. Some regional investors lack the market clout to have this effect.
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