As a bright-eyed entrepreneur with a viable product that customers are using, maybe you’re thinking it’s time to take the company to the next level. To grow, however, you need cash investments. So how do you court investors?
“The relationship between investors and entrepreneurs is a similar relationship to a bachelorette and a bachelor,” Todd Lowery, director of investment readiness for NexusLA, told a group of fledgling entrepreneurs at a recent BRAC Small Business Series seminar. “Typically investors are looking for high-growth companies to put their money into.”
Lowery offers the following tips to make a good impression with investors and to help land that coveted “I do (want to invest in your company).”
Investors often bet on the jockey—the management team—and not necessarily on the horse, or business idea.
Investors want: Market knowledge, leadership experience and coachability
How to stand out: Know how to acquire customers and understand trends, share past experiences and connote credibility, and be trustworthy. Demonstrate to investors you have emotional stability.
Investors want: Competitive advantage, understand competition, understand risks
How to stand out: Sustainability and intellectual property, anticipate market response
“We knew even in the best of times, most small businesses are going to struggle,” says Lowery. “Those who show the greatest potential are going to draw the most investment.”
Investors want: Game-changers, market validation and growing the market
How to stand out: Have a clear value proposition and be scalable, talk of the market and have a clear path to revenue, show significant potential and anticipate market response.
“Most of the people making investment want to see an exit opportunity,” says Lowery. “They want to be able to cash out in three to five years.”
Investors want: Robust financial model, reasonable assumptions and valuation
How to stand out: Three years pro-forma results, break-even path to cash flow, revenue growth, have a costs and exit scenario