To get investors you have to know investors. Investors have no problems and are not interested in the problems of entrepreneurs. The fact that entrepreneurs need lots of finance to fulfill their dreams is not going to make the investors part with his their money. Entrepreneurs and investors have to play a game of courtship, not unlike the courtship rituals in real life.
If you want an investor you will have to get good at the game.
Entrepreneurs must understand that they have a lot of competition. Good investors get several proposals a day. They only invest in maybe 5 proposals a year. Half of the proposals are not even opened. Half of the rest are opened, but cast away before reading. Have of those that remain will be cast away after reading and the rest will be considered. That is about 6%. Only one out of five of the considered proposals get financed.
Are you giving up hope already? Don’t! Your chances of getting financed with equity are actually quite good. Of the entrepreneurs who prepare well, about 25% get financed, 25% don’t need any finance after all, 25% need finance but don’t find it en 25% of the businesses was not viable after all. That means that only 25% of the well prepared entrepreneurs do not get the finance that they deserve.
How to get to the top of the heap.
If you don’t want your proposal to be cast away without opening, pay attention to detail. Do not send your proposal to 300 investors in the hope of improving your chances. You won’t. Also don’t send your entire business plan when no one asked you. First try to get into contact with the investor introduce yourself and your business and when invited thereto produce your well written and comprehensive business plan. A business plan should be clear and straightforward. Not more than 20 pages, font 11 or 12 line spacing 1,5. If not, I can assure you, it will not be read.
When asked in a social situation; “what do you do”? Make clear what your business is in less than 30 seconds. When presented with the opportunity to give a presentation, keep it under 5 minutes. Use no more than 10 slides with a font no smaller than 30 points.
The best way to assure that a business plan is read is to find out who the investor uses as gatekeepers. These are advisers the investor trusts and uses to source good business plans. These gatekeepers could be specialized intermediaries, or informal business contacts. Get the gatekeeper to introduce you to the investor. Your plan will certainly be read.
So what does an investor really want? You won’t get anywhere unless you find out what the investor really wants.
- Do you think the investor has too much money? So why offer him to relieve him of his burden?
- Do you think the investor has too little money? So why offer to make him rich? He is rich already.
- Do you think the investor has too much time? So why offer him to come and do your work?
- Do you think the investor has no alternatives? So why pay little attention to your presentation?
These are these are a few examples how not to attract a good investor. Good investors are not so much interested in money, as in business. Not all investors are good investors. They come in all shapes and sizes and have all kinds of interests. But in general you can say that there are only two kinds of investors. The one that brings you success for your company and the one that brings only sorrow and failure. The bad investors outnumber the good ones 10 to 1. A bad investor is only interested in money and will talk about it all the time, they want control and guarantees. They even want you to pay them. Good investors talk about your business. They want to know your product and see your (potential) clients. They want minority shares in your company and will leave the decisions up to you. Good investors only get rich when the company is successful and you get even richer.
So you cannot really say what investors want in general. You can only say what they don’t want in general. Each investor has slightly different preferences, that’s why you have to get to know them before you can make them an offer. Remember, entrepreneurs get financed every day, if you are not one of the lucky ones, you must be doing something wrong. Work on it. The investor can also spend his money on a beautiful new yacht, or a lovely country house in Tuscany or one of your competitors. Why should he not do that but invest in your dream instead?
Think about that for a minute.
Copy: Name
