Hello everyone and welcome again.
Do you know that there are several things you need to put into consideration before asking an investor to invest in your business for a percentage of equity in your business? You might have been into business for a while or want to go into one and you might be thinking that at one point in time, I will be pitching my business to an investor who will be handing me money and probably other benefits to grow my business, then you have to put this things I am going to be dishing out to you seriously.
An Angel investor is someone that has made enough money doing businesses, in most cases they are often billionaires and multi-millionaires who want to invest their money into start-ups so as to get a certain share in the company and allow their money work for them even though they have to monitor the business growth. In most cases angel investors pull out a percentage of their money when a company goes public so they can invest in other start-ups and leave another percentage so their investment still grows in cases where the business becomes an Amazon, Apple, or Alibaba in the future.
One
One thing you need to know before going to pitch your business to an investor is that first you must have a good business idea, and you must have a feasible and justifiable dream with good numbers to show that the future is bright. No investor cares about your billion dollar idea if your target isn’t feasible. You do not go to an investor telling them you will be a billion dollar company in the next 4 years and you do not know how to get there. It is like telling them you will be in Los Angeles in the next 2 hours but you do not know how to get there.
Two
An investor will always ask questions and one of the question they are likely going to ask you is to tell them your business plan in the next 12 months. Most investors do not ask beyond 12 months because they know if you cannot perform in 12 months, then you cannot perform in 12 years. An investor will be more concerned about what you can achieve in the very short term first before considering what you have to offer in long term.
Three
If you are into products or services, what an investor is concerned most about is how do you sell to your consumers, what is the difference between the cost price and the selling price for both wholesale and retail, and how much have you made in revenue and net profit since the beginning of the business. If you stutter when answering any of this or aren’t sure about your answers, then you do not have a deal.
Four
What is your market like and who are your competitors is not something you should not expect from an investor, they are putting in their money and want to know who they are up against. After knowing this, their concern shift to how do you sell your products to your consumers to beat your competitors. If you do not have a market for your product then there is no deal.
Five
How do you get your customers to buy your product and in cases where your product is an innovation, the investor will be willing to ask how you educate your customers on the use of the product. They will be willing to ask if the product can be self-explanatory to the buyer or it needs a technical assistant from a technician.
Six
How much of your money have you invested, how much of it have you realized as profit and how much do you still have in bank for your business? If your business has only being collecting money from you and has not been bringing in profit, then there will be no way an investor will put in their money into that business. If your business is bringing in good revenue, then the question goes to how much do you have in bank for your business either personally or from another investor.
Seven
Never sell a business idea your investor will not buy if they wanted to get the products or request a service. If your investor doesn’t do dogs and have a lot of people who do not like dogs, then be certain if you are going to sell a dog powder idea to them, they won’t buy it.
Eight
Be ready to negotiate your equity with the investor if they feel the money you are asking for is too high for the percentage in equity you are willing to let them have.
You need to check out the above eight necessity or commandment before pitching your business to an investor. These are the major things an investor will be willing to know about your business but most importantly they will be willing to know your before investing. An investor will not be willing to invest in a business owned by someone with a shaky background. This is the Ninth Commandment, keep your background clean.