Picking the right investors for your business is not a straightforward task for many entrepreneurs. Sometimes the amount of money an investor brings in may not be a significant factor. An investor will possibly sit on your company’s board, and the decisions they make may destroy your dreams or propagate your business to its peak potential. How do you find the right investors for your business?
Consider the Stage of Your Business
The initial step is to ensure that you are looking for the right level of investors for the stage of your business. While everyone wants that venture capitalist, you may benefit more by considering the right investor for your phase of business. The different options include personal investors (friends and family), angel investors, angel groups, peer-to-peer lenders, accelerators and incubators, venture capitalists, and corporate investors.
Consider the Investor’s Appeal to Others
The investor you bring on board may make your venture more or less attractive for other suitable investors to invest in now or in the future. The reputation of your board members will also influence the credibility of your venture. A recognized investment firm like The Chernin Group (TCG) will influence future investors to join your board and make significant investments. Remember, many investors see boards as platforms to develop relationships and a venue for building strong networks.
Ability to Fund and Fund Repeatedly
Raising money for your business is quite a challenge. You do not want to lose it or waste more time with those who lack funds available to invest in you. Finding new investors at every stage of investment is equally costly and time-consuming. It also dilutes your equity, and your company may become less attractive to future investors. To avoid these issues, find investors who understand and have a reputation for financing repeated rounds of investment.
You should select a diverse range of investors with diverse portfolios. This diversity has numerous benefits concerning influence, reach, and access. It also helps check your slack and raise funds in the future. Investors bring in more than just money. Where possible, find an investor who compliments your skills. For example, if you are good at production, you can find someone with marketing skills or connections to the proper distribution channels.
Investors Influence on Your Brand and Culture
For many companies, culture is a significant factor that distinguishes your business from others. Find an investor who blends well with your business culture and brand. The investor will most likely be part of your board and influence your brand and culture decisions. Remember that people will easily associate your investor’s brand with yours.
Compile a List of Possible Investors
There are numerous investors out there, but not all of them will be interested in your venture. It is therefore prudent to look for those with a record of investing in businesses in your industry. Start by looking for investors within your network. It is easy to overlook the likelihood of having investors in your networks. Trust the potential of your network; use tools like Crunchbase, LinkedIn, and AngelList, and develop a strategic plan to reach them.
Create a Pitch for Your Prospective Investors
Take time to contemplate what you want to say. You want to share your mission to attract an investor with a shared vision. Be clear about what you want and prepare well when going to meet an investor. Avoid fluff and adhere to the facts. Have a concise business plan that states your mission, detailed figures, and plans for the future. A well-articulated pitch will allow investors to know if they meet your criteria and will enable you to link with the right investor for your venture.
While capital is the key input to your business by investors, a good investor will provide more than money. Your business needs an experienced and knowledgeable enough to help your business grow.