At Company Partners we talk to a lot of Investors and we often get the same observations about what Investors like and don’t like.
Although I normally try and accentuate the positives to be learned, there are valuable lessons from the goofs to be avoided, here’s my top 8 mistakes when seeking an Investor:
- You know it all, any advice about your product, strategy or sales projections is actually criticism and must be defended.
- The most important thing is to talk in detail about your product or service, you haven’t got figures but the market is begging for it and the sales will be enormous.
- There isn’t a business plan, that’s not your expertise, you just want to get in front of an Investor and they will jump at the opportunity.
- Mails and any communication with Investors are perfectly all right with typos and all in lower case or “text speak”, it’s your idea not your spelling they should be interested in.
- No work has been done to prove the concept, you’ve not the money, expertise or contacts to do so, that’s why you want an Investor.
- Although the business hasn’t started yet and has no revenue you want £100k for 20% of the business.
- Good news you’ve found a potential Investor, but his demands of equity are unrealistic, after all it’s your baby we’re talking about.
- You don’t have any idea how much investment you need, or what it will be used for, you just know you need someone to invest.
Let’s face it, it’s hard to know what is needed or what to avoid when you are seeking investment for the first time and we shouldn’t diminish the hard work entrepreneurs do in looking to grow their business. It helps to learn from others mistakes though.
I’ll add one more that immediately springs to mind based on the several approaches I have had:
Total lack of market research.
Just because your mum, dad, brother, sister or a few friends liked the idea does not mean it is a great idea. At the very least, some proper market research should have been carried out.
After all the hard work that is put in to an investment plan and finding an invester,check out the investor in depth as they are not always what they seam, Having got investment agreed and this taking over 6 months to complete the invester turns out to be untrust worthy and unreliable.
This type of invester can put back and did put back the project some 12 months behind planned projections. Make sure the invester has the funds parked for your business if they are to be part of your future.
David, always remember you are running the business not the investor, regardless how good they “look”. No investor parks his/her funds, the essence of investing is money movement. Always have a plan B and you’ll never get disappointed. Don’t give up, never ever give up. Remember, there are always 3 different correct solutions to any problem.
I guess that’s why a team is better then a single man
You can’t do everything, you will always need someone with a different point of view
Thanks for tips, I’m finding myself in some of this 8 mistakes
Its quite often the case that you can find then research and be sure of the product only to collapse as it takes finance to go forward. Most like myself do not where to start other than speak to close friends or associates, then cross fingers.
Hi, today I have come back from pitching my idea to a husband and wife investment team. Upon arrival I could see that neither had looked through my business plan or if they had it was only very briefly. They stated I needed to find out the market figures, which I quickly referred back to my section within the business plan “market research”. Her response was oh well it wasn’t very well highlighted.
After seeking investment on three occasions and on all accounts I have never been given a definitive answer just the usual.. “great concept but you need to work on the business plan”. Which I have done and referred back to them and no reply……..I am starting this new venture alone, it may well be on a budget but I am out of options.
I’ll add one too; if some people replied to initial requests they might have found out a bit more info re: market research. In the first instance, you need to recognize a good idea/concept and ask some questions from there but that takes effort and insight. Everybody gets a chance to be the smartest bloke in the room when they are the only one in the room.
Alex-yours is the best advice ever- think creatively always,focus on your business and never give up!
Initally I am sure that I have made most of the 8 mistakes mentioned. I have corrected this to the point where only number 3 and 6 are a problem. I have taken care of all other mistakes mentioned. My business plan is poor (self written and not my expertise) and I do not have the available funding to pay for a proper business plan. In regard to number 6, all I have is emails from a former web site with persons wanting to purchase the product and a sales survey (agarin self conducted) which says that 7 out of ten persons are potential buyers of the product. The other blockage to investment is the nature of the machine. Most persons look at the product as perpetual motion (which it is not and perpetual motion cannot exist) which stops investment cold. If you wish to know more or can help in any way, I am eager to listen.
These are all good tips on what to avoid and in my experience a lot of companies seeking investment really don’t understand the requirements of an investor or see their business in the context of giving a realistic return with calculated risk. I try to get my clients into a dialogue with investors and facilitate discussion so that there is a better understanding of what the true value of the business is and how both parties can benefit. However on the flip side I think investors need to be very clear and honest about what they are looking for – for example it is unrealistic to expect a 300% return on an investment without some calculated risk.