As mentioned before in my previous articles, there are a myriad of different investors around for the entrepreneur to select from. We’ve already covered the kinds of investors there are, which is often business lenders, angel investors, institutional investors, or venture capitalists. This is just a broad selection of investors that you may see. When you have your business plan and your executive summary ready, you’re now ready to seek the proper investor to ask for capital.
There are several factors that you might want to consider before actually contacting your prospective investor. There are lots of things you’ll need to check into, such as stage, industry, and geographic preference. Furthermore, you should also look at their portfolio companies, who they’re and what they do. You might find this below.
Basically, stage describes the stage that the company is in. If you should be pre-prototype, or your prototype has just been developed, you’re either seed stage or early stage. infrastructure debt These stages are usually the greatest risk stages for investors, but their ROI, or return on investment could possibly be very high. On another hand if your company reaches a later stage and already features a regular flow of clients, the danger is generally lower to the investor. If your company is either seed or early stage, you will be needing an investor who’s more than likely a venture capitalist and specializes in high risk investments. On another hand, if you are a company that’s already established and needs bridge funding or expansion funding, you’ll need an investment firm or an exclusive equity firm that specializes in the later stages of a company’s life. This means that you will need an investor, who’s stage preference is either later stage, growth or expansion stage, or mezzanine stage. These are usually stages of companies who’re ready for a liquidation event, where in fact the investors exit and make their profits. Which means these companies may be either involved with a leveraged buyout or LBO, or even a managed buyout or MBO. Mezzanine stage is each time a company is ready for mezzanine capital. This is actually the capital a company needs because it prepares for an IPO or initial public offering. That is also a liquidation event.
Geographic preference is just as important as an investor’s stage preference. Your company may fit an investor’s stage preference, but may very well not maintain the proper geographic location that the particular investor might invest in. You can find different investors around the world and the smaller firms might just choose particular geographic location, whereas some of the larger global investment firms will invest internationally. Other investors may invest in a whole continental area, for instance Uncle Vasya Ventures may invest in Eurasia, which will encompass Russia, Central Asia, the countries which make up the former republics of the Soviet Union and Eastern Europe and Aunt Valya Private Equity might invest only within continental Europe. When seeking an investor, you must learn where their geographic preference is. Sometimes that is shown on their websites, and sometimes not. A great way to find out what geographic location an investor prefers is by considering its portfolio companies and the countries where they’re located.
Industry preference is equally as important while the both previously discussed preferences. Usually investors invest in the industries that their partners or portfolio companies have expertise in. When looking for an investor, you’ll need to consider the industry that you are in and you want to have an investor who gets the expertise in exactly the same industry that you are in. You can have an excellent product, but if you are in the IT industry and you contact a VC firm that produces its investments in the pharmaceuticals industry, your executive summary will not be looked at.
Determining an investor’s industry preference can be achieved by first considering their portfolio companies, and sometimes, the industry preferences are shown on investors’ website. If you appear at an investor’s portfolio, and see what the industries that the portfolio companies are involved with, you will get a glimpse of what industry preference certain investor might have. It’s essential that you find an investor who’s preferences meet your company profile.