Taking on investors for your business
So you've got your business up and rolling by spending your own hard earned money and you seem to be successful in your efforts to keep it running.Now you are looking for someone to help you take the next step in expanding and it is truly the only thing to do if you want your business to grow.Venture capital firms and angel investors are two of your best options.They will give you the opportunity to hire some valuable employees, maybe open an office or two, and perhaps even give yourself a salary.
Venture capital firms invest their money mainly into other businesses or organizations.It is usually in large sums of money and with companies that are more established with a proven track record.However there are some venture capital firms that will take the chance and invest their money into early stage businesses or companies.
Angel investors are usually wealthy individuals, groups or associations that invest their own money into your business.They are looking for a higher return on you, than they might see with more traditional businesses.Most are very successful entrepreneurs themselves who want to help others get their business off and running.The level of funding usually ranges anywhere between $150,000 to 1.5 million.
Now that we know a little more about who we want have as our investors, let's look at a list of things to consider before taking on investors for your business.
1. Know the investor market.The basis of your business proposition is based on a large and growing market.You need to know everything there is to know about it.What constitutes your market; what is the market growth; what is the competition; etc?These are key questions you will need to have the answers to before you present your business plan to an investor.Venture capital firms and angel investors are slightly different when it comes to how and with whom they invest their money with.Keep this in mind as you are making your business proposal.In understanding the investor market, you will also want to understand market trends.
2. Consider your Competition.Be sure before you go and talk with any investor that you already know everything about your competition. It does not sit well with an investor when they know more about the competition than you do, or even worse identifies one you have not even considered.You potential investor will most definitely conclude that you have not done the research you should have and send you on your way.You want to show them that you are up to stuff on whom and what is out there so they feel confident in investing with you, not afraid.
3. Have a detailed business plan.An investor's first glimpse of your company is through your business plan.If it lacks details, you will portray yourself as a poor businessman.Be sure to include the following items in your business plan:
- Description of your competition (as previously discussed)
- Value proposition or return of your investment
- Marketing model and management team
- Financial projections
- Previous track record of patents, customers, or previous investments
- Compatibility with your potential investor
Be sure as you are going over your business plan with your potential investor that you let them know how passionate you are about your business.Do not be afraid to let them know that you are excited about what you do.Investors are more likely to get excited about investing if they know your heart is in it.
4. Investors are Partners.When you bring an investor into your company, you enter into a very close relationship.You become partners, and with that you both take on the responsibility of making sure your return is successful.Make sure you talk about important items such as whether or not you are willing to sell the business; what happens if you disagree on some matter.You want to be on the same page about everything before you become partners with someone.
Before taking on an investor for your business it is wise to counsel with a lawyer or professional in the start up business.Bring an investor into your business may or may not be the right step for you, so carefully weigh all your options.