As mentioned before in my previous articles, there are all kinds of different investors around for the entrepreneur to choose from. We’ve already covered the kinds of investors there are, which can be business lenders, angel investors, institutional investors, or venture capitalists. This is really a broad range of investors that you may see. Once you have your company plan and your executive summary ready, you’re now ready to get the proper investor to require capital.
There are several factors that you need to consider before actually contacting your prospective investor. There are many things you will need to appear into, such as stage, industry, and geographic preference. Furthermore, you should also look at their portfolio companies, who they are and what they do. You might find all of this below.
Basically, stage identifies the stage that your company is in. If you are pre-prototype, or your prototype has just been developed, you’re either seed stage or early stage. These stages are generally the best risk stages for investors, but their ROI, or return on investment could possibly be very high. listed infrastructure funds On one other hand if your company reaches 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 require an investor who is more than likely a venture capitalist and specializes in high risk investments. On one other hand, if you should be an organization that’s already established and needs bridge funding or expansion funding, you will need an investment firm or a personal equity firm that specializes in the later stages of a company’s life. This means 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’re ready for a liquidation event, where in fact the investors exit and make their profits. This means that these companies can be either associated with a leveraged buyout or LBO, or a managed buyout or MBO. Mezzanine stage is when a company is ready for mezzanine capital. This is the capital an organization needs as 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 you might not take the proper geographic location that the particular investor might invest in. You can find different investors around the world and small firms could invest in a particular geographic location, whereas some of the larger global investment firms will invest internationally. Other investors may spend money on a whole continental area, like Uncle Vasya Ventures may spend money on Eurasia, which will encompass Russia, Central Asia, the countries that 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 must discover where their geographic preference is. Sometimes this is shown on their websites, and sometimes not. An effective way to determine what geographic location an investor prefers is by looking at its portfolio companies and the countries where they are located.
Industry preference is just as important since the both previously discussed preferences. Usually investors spend money on the industries that their partners or portfolio companies have expertise in. When searching for an investor, you will need to consider the industry that you’re in and you wish to have an investor who has got the expertise in the same industry that you’re in. You might have a fantastic product, but if you should be in the IT industry and you contact a VC firm that makes its investments in the pharmaceuticals industry, your executive summary won’t be looked at.
Determining an investor’s industry preference can be carried out by first looking at their portfolio companies, and sometimes, a 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 will get a glimpse of what industry preference confirmed investor might have. It’s important that you find an investor who’s preferences meet your company profile.