How nice it would be if investors were as enthusiastic about your business as you are, lining up outside your door to give you money. Sadly, it doesn’t often work that way. Finding an investor is a lot of work. Finding a good one, who is a good match for your business, is painstakingly harder than it seems.
Don’t Be Blinded By $$$
When you do find an interested investor, you’re inclination may be to accept the money first and ask questions later. Don’t do it! Think about who the investor is and what their investment objective may be. Make sure to have an experienced corporate lawyer working for you, and try to ask around to find out information about the investor if you can.
Simple Questions to Ask Potential Investors
You want to surround yourself with helpful, positive and experienced people. How they respond to these basic questions can reveal a lot about what type of person the potential investor is.
* Tell me about previous deals have you been involved in?
* How have you helped the companies you’ve invested with in the past?
* What are some of your investment successes, and how do you think we can be another success for you?
* What are some of your investment failures, and how can we avoid becoming another failure for you?
Watch for clues as to how this investor behaves, in particular during the failures. Did he stand on the outside and criticize, or did he loosen his tie and get to work with the team?
Investor Personalities to Watch Out For
The “Pay Me First” Investor:
There are some consultants who pose as “investors” to unsuspecting entrepreneurs. They’ll express interest in investing in your company, promising you’ll see their funds just as soon as you hire them to complete XYZ task. This is both poor consultant and investor behavior.
The “I’ll Help You Raise Money” Investor:
Watch out for the “investor” who offers to help you raise money in exchange for a significant equity or co-founder position. This scenario will net you zero on the credit side of the ledger, and you will have lost significant equity share.
The “Analysis Paralysis” Investor:
This person can’t say no, and can’t say yes. There’s always another report, chart, dataset or event they need to see before they can decide. You will waste valuable time supplying information and responding to questions, but you will likely never close the deal.
Check References
Ask your potential investor to provide references, and check them carefully. Even if they haven’t invested before, references are a great way to gauge whether they will be a good fit for your business.
Accredited investors are more likely to understand and appreciate the risks entrepreneurs take every day to build their businesses. To learn more about how you can accredit investors, visit Verify Investor.
