As discussed earlier in my own previous articles, you will find all sorts of different investors around for the entrepreneur to choose from. listed infrastructure We have already covered the types of investors you will find, which may be business lenders, angel investors, institutional investors, or venture capitalists. This is just a broad selection of investors that you could see. Once you have your business plan and your executive summary ready, you are now ready to find the proper investor to ask for capital.
There are several factors that you’ll require to take into consideration before actually contacting your prospective investor. There are many things you will need to check into, such as for instance stage, industry, and geographic preference. Furthermore, it’s also advisable to look at their portfolio companies, who they are and what they do. You will dsicover all this below.
Stage Preference
Basically, stage identifies the stage that the company is in. If you’re pre-prototype, or your prototype has just been developed, you are either seed stage or early stage. These stages usually are the highest risk stages for investors, but their ROI, or return on investment could be very high. On the other hand if your company is at a later stage and already includes a regular flow of clients, the risk is generally lower to the investor. If your company is either seed or early stage, you will be needing an investor who’s most likely a venture capitalist and specializes in high risk investments. On the other hand, if you’re a business that is already established and needs bridge funding or expansion funding, you will need an investment firm or an exclusive equity firm that specializes in the later stages of a company’s life. What this means is 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 may be either associated with a leveraged buyout or LBO, or even a managed buyout or MBO. Mezzanine stage is when a company is ready for mezzanine capital. This is the capital a business needs as it prepares for an IPO or initial public offering. This is also a liquidation event.
Geographic Preference
Geographic preference is just as important as an investor’s stage preference. Your company may fit an investor’s stage preference, but you may not be in the proper geographic location a particular investor might invest in. There are different investors across the world and small firms may indeed invest in a particular geographic location, whereas a few 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 would encompass Russia, Central Asia, the countries that produce 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 must find out where their geographic preference is. Sometimes this is shown on the websites, and sometimes not. A good way to determine what geographic location an investor prefers is by considering its portfolio companies and the countries where they are located.
Industry Preference
Industry preference is equally as important because the both previously discussed preferences. Usually investors spend money on the industries that their partners or portfolio companies have expertise in. When trying to find an investor, you will need to consider the industry that you are in and you want to have an investor who has got the expertise in exactly 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 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 considering 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 associated with, you can get a view of what industry preference a given investor might have. It’s essential that you find an investor who’s preferences meet your company profile.
