As mentioned before in my previous articles, there are a myriad of different investors around for the entrepreneur to choose from. We have already covered the types of investors there are, which may be business lenders, angel investors, institutional investors, or venture capitalists. This is just a broad range of investors that you could see. Once you have your business plan and your executive summary ready, you’re now ready to find the right investor to require capital.
There are several factors that you need to take into account before actually contacting your prospective investor. There are numerous things you’ll need to look 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 will dsicover this below.
Basically, stage identifies 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. These stages are generally the highest risk stages for investors, but their ROI, or return on investment could possibly be very high. On one other hand if your company is at a later stage and already includes a regular flow of clients, the chance is generally lower to the investor. If your company is either seed or early stage, you will be needing an investor who is probably a venture capitalist and specializes in high risk investments. On one other hand, if you’re a business that’s already established and needs bridge funding or expansion funding, you’ll need an investment firm or a private equity firm that specializes in the later stages of a company’s life. This implies you will need an investor, who’s stage preference is either later stage, growth or expansion stage, or mezzanine stage. They’re usually stages of companies who are ready for a liquidation event, where in actuality the investors exit and make their profits. Which means these companies could be either involved in a leveraged buyout or LBO, or a managed buyout or MBO. Mezzanine stage is when a company is ready for mezzanine capital. This is actually the capital a business needs since it prepares for an IPO or initial public offering. This really is also a liquidation event.
Geographic preference is just as important being an investor’s stage preference. Your company may fit an investor’s stage preference, but may very well not take the right geographic location that a particular investor might invest in. listed infrastructure There are different investors across the world and the smaller firms may indeed invest in a particular geographic location, whereas some of the larger global investment firms will invest internationally. Other investors may spend money on an entire continental area, like Uncle Vasya Ventures may spend money on 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 ought to discover where their geographic preference is. Sometimes this is shown on the websites, and sometimes not. An effective way to find out what geographic location an investor prefers is by looking at its portfolio companies and the countries where they’re located.
Industry preference is just as important while the both previously discussed preferences. Usually investors spend money on the industries that their partners or portfolio companies have expertise in. When looking for an investor, you’ll need to look at the industry that you’re in and you want to have an investor who has the expertise in the same industry that you’re in. You can have an excellent product, but if you’re in the IT industry and you contact a VC firm which makes its investments in the pharmaceuticals industry, your executive summary will not be looked at.
Determining an investor’s industry preference can be carried out by first looking at their portfolio companies, and sometimes, the industry preferences are shown on investors’ website. If you look at an investor’s portfolio, and see what the industries that the portfolio companies are involved in, you can get a view of what industry preference confirmed investor might have. It’s important that you find an investor who’s preferences meet your company profile.