An investor will look for three things when reviewing your business plan:
An executive summary of the company and its opportunity that is written in a way that speaks to investors and not techies.
Market analysis and competitive dynamics analysis include strategies for catching up to those bigger players, as well as those focused on new markets. The market analysis section is where you showcase your most valuable products and how it fits in the market.
Financial projections, including 3 years of projections – typically on an annual basis. “This is really where investors want to see what you think the future of your company looks like,” says Hosken.
The briefer, simpler, and more specific the better- “less is more” is often seen as a necessary mantra for anyone trying to secure funding.
Getting into the mind of an investor
So, how do you really get an investor’s attention? You have to understand how they think, and you have to be able to present a compelling story that is tailored to their world.
“They are not going to get your plan unless you understand the investor, you know what they are looking for, and you tailor your plan to them,” says Hosken.
TIP: The most common mistake is to send a generic, undifferentiated plan to investors. An investor wants to know why they should invest in your business, not what they can get out of it.
Getting the right investor
“There is no such thing as a good investor, there is only a bad investor,” says Hosken.
“So what makes an investor good? What makes them bad? It’s really the same question. It’s what you can do for them that they can’t do for themselves.”
“It’s important to find investors who are willing to put their own money on the line, and will let you use it,” says Hosken.
“Investors like to know that the company has skin in the game.”
TIP: Be sure to find an investor who can be patient with your timeline.
Types of Investment Sources
There are different types of sources that you can tap into to raise capital.
Some sources of capital are more likely to invest in your company than others.
Family and Friends.
Hosken recommends that you start with family and friends. “If they know you, they know you. You have an existing relationship with them,” he says.
“If they like you, they’ll be more willing to put money on the table. This is a good place to start.”
You should also start with a couple of friends who are investors. They will be able to put in more money, and their advice will be invaluable.
If you’re a little further along in your planning, you can also approach angel investors. Angel investors are typical “friends of friends” who have more money to invest than they can comfortably manage on their own.
“These are often business people who have already been through the process and have a strong sense of who you are and what you’re doing,” says Hosken.
An investor may be able to offer a loan or make an equity investment, or they may be able to help you secure a bank loan.
“This is a good way to get a foot in the door with an investor, but it’s not a very effective way to raise a lot of money,” says Hosken.
The third option is venture capital. “It’s an investment that comes from outside your company. This is where you go to your big banks, and to private equity firms, and they take on a portion of your company and help you grow,” says Hosken.
The best way to approach venture capital is to work with an investment bank that has a relationship with venture capital firms.
If you have a relationship with an angel investor or an investment bank, it’s best to get the ball rolling before you launch. “If you don’t have anything in the bank, then you’re really starting from scratch,” says Hosken.
If you’re trying to raise capital from angels or venture capital, the next step is to go to an accelerator. An accelerator is a company that provides funding, mentoring, and business advice to a company before it goes out to investors.
“They get a bunch of entrepreneurs to work together, and it’s a way for them to get to know you, see what you’re doing, and decide if they think you have a good business plan and the team to do it,” says Hosken.
He recommends that you start with accelerators in your area. “If you can’t get an accelerator in your area, go to accelerators that are closest to you.
If you’re not able to secure funding through any of the above, you may have to crowdfund your business. Crowdfunding is where you put up your own money and ask for help from others.
Crowdfunding can be an effective way to get the money you need, but it’s not for everyone. “It’s more common for people who are trying to raise a lot of money. But there are some investors out there who will put money into a company that has a small amount of capital.
“If you have a big idea, you should try to crowdfund, but you may have to take a lot of risk on your own,” says Hosken.
The Bottom Line
Business investors are investors who want to invest in a company, usually a business. Business investors will usually invest in a company that they want to work for or that they are familiar with. They will also usually have a good amount of money to invest in a business. There are different types of investors. They are venture capital investors, institutional investors, and angel investors. What is your investment strategy? Do you invest in a business? If so, how much money do you have to invest? Have you done any business investments before? How did it go? What are your thoughts on business investment? If you have any questions, please share your thoughts in the comments below.