What's In It For Your Investor?

I attended a community meeting this morning where they were discussing building a community oriented venture capital fund.  They discussed several reason why this would benefit the community, why this would help the businesses in the community and why the corporate partners should "invest" in the program.  From there I went to present at an "Ideas to Deals Live" session at the Dublin Entrepreneurial Center where I spoke about what investors look for in a deal.  It really got me thinking about the difference between the first meeting and the second meeting. The first meeting was basically asking people/corporations for a contribution the second meeting was talking about investment.

As you are pitching investors it is critical that you are really focused on financial return.  Investors are willing to buy into your business based on their analysis of the risk of your opportunity versus the return that can be gained from your opportunity.  True investors are in it for the money.  Yes, they have a good feel for the entrepreneur and their type of business but at the end of the day when they are making a decision on whether or not to invest it comes down to money.  Investors are usually either investing their own money, in the case of angel investors, or other people's money, in the case of institutional venture capital.  They are typically not investing in ideas that are so early stage that they have no path to the market.  They are not investing to make the community better and create jobs.  Intangibles might tip the scale if they are debating whether to invest but the key determining factor is cash.

Here are a few quick tips when dealing with investors:

• Focus on the business more than the product/technology
• Show there is a problem in a big market that you can solve
• Discuss how your team can make this work to create an investable business
• Focus on working with the investor to build an investable deal more than a just a business
• Don't give the investor a reason to say no (trust me, they are looking for a reason to say no)
• Show passion for your business without being adversarial
• Finally, listen and learn

Remember, business is business...treat it that way.