Convincing investors to invest in your company is one of the easiest ways to raise capital. When you are running a business, it is more likely at one point to raise more capital. But because you need more capital doesn’t mean you have to welcome just everyone as an investor especially if it means giving them a piece of your business in return for their investment.
Some investors have an unsavory character that they might just want your company to go dry. It will be very difficult to get along with such an investor. To help you avoid getting into business with an investor of that nature, it is important to do checks before accepting anyone as an investor in your company.
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Have it in mind that when you are taking someone to invest in your company, you may also have to give up some equity in it. And by doing so, you give out some of your power too. It is important to ask about the terms of the partnership before signing any deal.
You should know how much you want to raise before signing and also be ready to give up equity in your company.
How to identify your ideal investor
Look for someone who has much experience in doing what you’re doing or the business you are into. Look for an investor who will understand the industry you find yourself in. And also look for someone who will be willing to pitch in when you need advice with a very good business development network.
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An ideal investor may also have connections to other investors who would be willing to invest in your company.
It is important to take an investor whose goals align well with yours in order not to be forced into doing something you don’t want to do. Worst of all, kept from doing something you really want to do.
You should take time to understand what investors expect from your business if they sink some of their own cash into it. Also, you and your investor should have the same goals towards the said business to avoid clashes. You can easily know the goal of an investor by demanding to know what their five-year plan looks like.
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You can as well ask your investors for permission to interact with the heads of their portfolio companies and get opinions on what it is like working with them.
Some investors are completely hands-off their investment while others are very involved in the day-to-day operation of your business.
It might seem strange to turn down money but business owners shouldn’t just take investment from anyone they can get money from.
Not every investor will be a good fit for what you want to do. And not all will have the knowledge and connection that will help you grow.
