As mentioned before in my previous articles, you can find all kinds of different investors around for the entrepreneur to decide on from. We have already covered the forms of investors you can find, which can be business lenders, angel investors, institutional investors, or venture capitalists. This is really a broad array of investors that you might see. Once you have your organization plan and your executive summary ready, you’re now ready to find the best investor to request capital.
There are several factors that you need to consider before actually contacting your prospective investor. There are numerous things you will need to appear into, listed infrastructure funds such as for instance stage, industry, and geographic preference. Furthermore, you should also look at their portfolio companies, who they are and what they do. You will dsicover all 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. 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 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 need an investor who’s probably a venture capitalist and specializes in high risk investments. On another hand, if you’re a company that’s already established and needs bridge funding or expansion funding, you will need an investment firm or a private equity firm that specializes in the later stages of a company’s life. What this means is 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 that are ready for a liquidation event, where the investors exit and make their profits. Which means these companies can be either involved with a leveraged buyout or LBO, or even a managed buyout or MBO. Mezzanine stage is when a company is ready for mezzanine capital. Here is the capital a company needs because it prepares for an IPO or initial public offering. This is also a liquidation event.
Geographic preference is quite as important being an investor’s stage preference. Your company may fit an investor’s stage preference, but may very well not maintain the best geographic location a particular investor might invest in. You can find different investors around the world and the smaller firms could invest in a particular geographic location, whereas a few of the larger global investment firms will invest internationally. Other investors may invest in an entire continental area, as an example 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 need to discover where their geographic preference is. Sometimes this is shown on their websites, and sometimes not. A great way to figure out what geographic location an investor prefers is by considering its portfolio companies and the countries where they are located.
Industry preference is simply as important because the both above mentioned preferences. Usually investors invest in the industries that their partners or portfolio companies have expertise in. When trying to find an investor, you will need to look at the industry that you are in and you want to have an investor who gets the expertise in the same industry that you are in. You may have a fantastic product, but if you’re in the IT industry and you contact a VC firm that makes 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 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 with, you can get a view of what industry preference a given investor might have. It’s important that you find an investor who’s preferences meet your company profile.