I do not care what you are selling, let's talk about what I need!
Investments come in different forms. Entrepreneurs think mostly in terms of money. Investors see investments as money, time, technology, contacts, and resources. Early stage companies need seasoned professionals to contribute to the build out of the business. The professionals see the opportunity as a means of investing, giving back, and obtaining upside from their time commitment. There is a different view from the window depending on what it desired by each investor.
No one ever makes an investment to lose money. There is a minimal requirement of return of the investment cash component. Time losses are not bad if the investor has an interest in learning more about the field, enjoys working with the entrepreneur, and/or made new contact connections. The return on investment for each investor may be more than the cash component.
Investors in the public equities have differing goals for their investment. Earlier in age, there is often a desire to take greater risk for greater upside. A shift develops as investors’ age and start to see retirement. At this time, capital stability is important and annual income takes a higher level of importance; i.e. more stable cash producing assets. Investors depending on age and resources see investments differently.
Entrepreneurs need to understand what drives the investors they wish to attract in order to pitch the company appropriately. The investors may fall in groupings, but each grouping may have differing needs and desires. Even in the VC arena, there are differences in the needs annually. They selected areas they feel are high priorities or an investor expresses interest in a field. It is common to find new partners or investors in a fund seeking to develop better awareness about a new field. Investors always want to make money, but if the fund promises to report on technology advances, having the right technologies becomes an important consideration.
Angel investors may wish to have hands on participation. They may want to have the feeling of helping build a great company. A sense of accomplishment has value to many people.
Some former executives love to work with exciting technologies and help build companies. They may be ultraconservative with their cash investments in order to splurge on risky ventures by a time commitment. Using their contacts and experience to help grow a new company can be an exciting activity. While they do not contribute cash, do not underestimate the value of their experience and time. These are real investments.
In building your company, the needs and types of investment will vary. Understanding the value of each type of investment is important as is the drivers of the group or individual making the investment. The ability to attract the right types of investment is partly due to your ability to sell the business model. The other very important part is the recognition of selling something that fits the needs of the investor. In some respects, it is not much different from purchasing goods or services. You are selling something to someone that wants it and believe it fits his or her goals. Try to understand their goals because it may help you improve the sales pitch and get a better reception from the investor!
Taffy Williams is the author of: Think Agile: How Smart Entrepreneurs Adapt in Order to Succeed to via Amazon