At some point, many companies will need to raise capital in order to grow and expand the business. While this is admittedly not the case of all companies, several desire to expand more quickly than cash flow levels enables them to with reasonable security. This blog post is designed to help entrepreneurs and management to understand the methods of approaching investors to raise investment capital. First, it will take a step back to determine who should be targeted and under what methods.
Targeting investors is not a numbers game, it requires research to save wasting the time of both parties. Second, we will discuss methods to ensure that questions may be answered effectively and communication is both honest and available for them to make effective decisions. Without such information, the company is risking disregard due to ethical skepticism or a general lack of available data for decision making.
Targeting the Right Investors
If you have ever searched for a job, you may find it ineffective to gather an e-mail database of potential employers and send an e-mail blast with a tagline as follows: ‘High Potential Candidate Offers $2.5 M NPV for $50,000 per year’. While this may get passed around the office, it would almost certainly not help your candidacy to be taken seriously. Instead, the effective candidate conducts research on the target company to ensure that the firm’s resources are aligned with the candidate’s personal and professional objectives.
The same is true for investors, many companies will send business plans to investors that are in entirely different markets, hoping that they will make an exception or not conducting research on the investor at all. By doing this, communication becomes stale and the ones that are aligned begin to feel like a cold redundant sales pitch rather than a legitimate investment opportunity.
By targeting the ‘right’ investors, your company can determine the portfolio aligned with investment and the value added the investors may bring to the table. Are you wanting someone to be engaged with the company or provide the investment and step back? How does the firm’s portfolio perform? These questions may be effectively answered by performing initial research on the company in question. In return, you will have greater knowledge about the investment companies and the types of opportunities that they invest in.
Preparing for Questions
Pro Business Plans has helped many entrepreneurs prepare for meetings with investors. Generally we have found there to be two mistakes that exist when entering discussions with them. The first mistake is a general nervousness that sometimes may risk coming across as a lack of confidence and be received in many different forms. This may also be reversed into being overconfident during the entire process in the sense of trying to sell the investment needs in the method of a stereotypical door to door salesman. By being focused, confident and providing a direct answer to what was asked you can help the investor to gather information and protect your reputation in the process.
The second mistake is not being properly prepared for questions, some of which may be unforeseen. It is encouraged to have a member of your team prepared to answer business, legal/compliance and technical questions when they arise. If the businessperson of the team answers a question about the customer needs, he/she may not be able to deliver a question about the technical infrastructure. This balance of questions being answered displays a well-rounded team. How can a company unable to answer a technical question resolve a technical issue when it arises or initiate an effective marketing campaign if they are unaware of the value proposition of a technology?