What to Keep in Mind When Looking for Investors

Looking for InvestorsCongratulations, you’ve decided to launch your company! You have an exciting business idea; you’ve thought through all the necessary steps to start and run your enterprise. If your venture requires more money than you have, the next move will be finding investors. This part is the most challenging. Admit it; you don’t have a habit of speaking with 50+ investors who get dozens of pitches like yours every day. The investors want to know why they should trust you, so show them that your business is worth their hard-earned cash. Every investor has his/her own approach to the evaluation of pitches. “Some do substantial due diligence before meeting (reading a plan, talking to people they know) and others granting a meeting without even looking at the plan at all. Some investors rely on their intuition while others crunch a lot of numbers. Almost all of them source carefully, make good use of co-investors, and focus on the entrepreneur and team” [1]. But, if you are a first-time entrepreneur and never dealt with investors, you may not know some factors that can be decisive for them. Let’s enlarge upon that point, following ideas of John Rampton [2].

1. The first factor that can discourage investors to give you money is a lack of potential success. Investors will be interested in your previous business experience such as launching a startup and whether it was a success, or not.

2. Trust is a must-have between you and investors. If they don’t trust your character, judgment, or leadership skills, it’s better not to start any mutual business at all. As the entrepreneur, be open to discussing issues and concerns regarding the company with investors. They want to know everything about your startup. Don’t worry; nobody is going to steal your business idea!

3. Character and professional skills of the members of your team play an important role in the business growth. Every investor will pay close attention to the team personnel.

4. A good business plan is crucial. An investor has to be impressed with it to invest.

5. A company that creates something new or has a new business model can easily attract investment.

6. Make sure you’ve chosen the right investors. Do research and locate those who are involved in your field before contacting them.

7. It is important for an investor to see that other investors are also interested in supporting your business and believe in your startup’s potential.

8. You’ve got “No” from an investor. Handle it properly. Think, what went wrong and make adjustments. Even after refusal, investors are watching you.

Remember, investors invest in people, not the idea. So, don’t pretend to be someone you’re not. Know your weaknesses and work on them. For example, if you’re afraid of speaking in front of people – learn the skill! You’ll need to present an interesting and clear presentation to attract capital investment. A denial from an investor doesn’t mean you’re a loser; this is just a temporary hitch. If an investor tells you: “Come back when you have more traction” he means exactly that. But, before you decide to come back to the same investor, know that there are 250,000 others in the United States alone.

References:

1. “Winning Angels: The 7 Fundamentals of Early Stage Investing” David Amis, Howard Stevenson 2001
2. Entrepreneur.com: “25 Reasons I Will Not Invest in Your Startup” John Rampton, September 2014