Get a YES from Investors by Avoiding the Negatives
Venture Capitalists and ‘Angel’ Investors compound their wealth by investing wisely, thoroughly scrutinising the whole operation of any entrepreneur seeking their capital, before deciding Yea or Nay.
If you’re an entrepreneur looking for funding to launch or scale-up your business, here is a check-list of some issues that will elicit caution from many experienced investors.
First Product or Only Product?
It takes time for a good idea to become a product – has time rendered it obsolete? Is it too easy for established companies to add the best features to their product ranges? If all your hopes rest on a single idea and the rug is pulled from under, the investment is unattractive. Entrepreneurs with experience in their field will be able to encompass a broader concept of products. And it’s not just about the product or service – the structure supporting it needs to be in place: branding, marketing, sales, etc.
An Entrepreneur needs to commit at least 100% of his or her day to making the product or service succeed. It is rare to be able to earn money during the day and become a successful entrepreneur in the evenings – and investors will not be impressed unless you are totally dedicated to making them richer!
Get a Financial Head
You may be good at a number of management areas – marketing, sales, technology – but unless you have expertise in accounting, tax rules, pricing policies and so on, you will need someone who does. This requirement is not negotiable.
Keep Accurate Records – of everything
Entrepreneurs and sales-oriented minds are keen to move forward and often find it difficult to bother with administration. It is essential to keep accurate records of funds, costs, expenses, intellectual property, shareholders, liabilities and more. Investors will spot every questionable detail therefore the company’s books must be complete and accurate.
Board members and senior management with relationships may have divided loyalties. You will need to demonstrate that company decisions will be taken by the right people and for the right reasons. This is especially important with a husband and wife business, where the family home, their relationship and, subsequently, the stability of the company may be at risk.
Investors will want ‘preference shares’ rather than ordinary shares. Ordinary shares are the last ones to be paid out if the company pays a dividend, or fails and goes into administration. Preference shares take preference over any other stock or shareholding, i.e. they have first call.
If you can meet the above criteria, you could be on your way to finding an investor.
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