Saturday, July 31

Top 3 Things to Know About Investors Before You Ask for Money

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TV shows can make securing investment funding seem so easy. Yet nothing in business is. If you are an entrepreneur looking to fund your enterprise, you’re not going to wrap everything up in a nice, neat 60-minute package. Convincing investors will take a lot of hard work and plenty of time.

Plan to put in the work before you make your pitch. While you are pitching, you will undergo a barrage of probing questions designed to determine whether or not you really know what you’re doing. After the fact, you’ll be supplying investors with tons of information they need to satisfy every concern.

Still interested in seeking out investment capital? If so, here are the top three things you need to know about investors before you ask for money:

1. They Will Conduct Due Diligence

If you manage to get past the pitch stage, know that investors will conduct due diligence. They may do it on their own or enlist the services of a company like Utah-based Mezy. Either way, it will get done. They will look into you, your management team, and every aspect of your business. They will leave no stone unturned.

The point of due diligence is to protect their interests. Understandably, investors want to put their money into projects that offer a reasonable promise of good returns. They do not want to take unnecessary risks on bad ideas. They don’t want to invest in management teams that lack knowledge and experience. So again, be prepared for due diligence.

2. They Love Experience

The next thing you need to know about investors is that they love experience. The more experience you and your management team bring to the table, the more investors will be impressed.

Note that there are two types of experience investors want to see. First is general business experience. They want to see that you know how to run a business day today. They want to see that you and your management team have good business acumen. As for the second type of experience, it is industry specific.

If your enterprise is a fledgling widget company, investors want to know that you know a thing or two about widgets. Your management team should have some experience as well. And if your industry is highly specialized, your combined experience should be commensurate with the level of specialization.

3. They Are the Only Source of Funding

Third, understand before you ever begin your pitch that angel and venture capital investors are not the only sources of funding. Nor is that particular group. This is important for the simple fact that you don’t want to put all your eggs in one basket. You want to go into your meeting with the understanding that if this group of investors doesn’t see the value in your opportunity, you will take it elsewhere.

The right attitude can go a long way toward sustaining you even if a certain group of investors turns you down. More importantly, if they know that you know they are not the only game in town, they may have a greater sense of urgency to get on board with your idea. If it is that good – and it is backed by a solid business plan and a trusted management team – they may not want to lose out on the opportunity.

Professional investors could be a key component in funding your company. Just know what you’re getting into before you start asking for money. The last thing you want is to show that you are surprised by what happens during that initial interview.

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