What Do I Need To Look At To See If An Investor Will Invest In My Company?

As I have written in some of my previous articles

, there are all kinds of different investors available and different kinds of capital that you can raise for your business, but in order to successfully raise your capital and have a successful business, you need to know more about the investors who will be investing in your company.

Usually institutional investors, such as investors who invest private equity or venture capitalists have different preferences in who they invest, where they invest, and what kind of company they invest.

Stage Preference

One preference that you need to pay attention to when you are looking for an investor to invest in your company is stage preference. Stage preference refers to what stage an investor will invest in. As your company moves up the latter, it goes through different stages, with the first being seed or early stage to the last stage being liquidation. All these stages have different classifications and their related risks. Investors usually know these risks but may have an expertise in a particular stage of a companys life and will invest accordingly. For example, if your company is in its early stages, it can be a big risk to the investor, but it can also have the potential to provide the investor a high ROI, or return on investment. There are investors who like that kind of risk and will invest in early stage companies with multiple rounds of funding.

On the other hand, if your company is already mature and is either looking to expand or liquidate, you need to look for a company that primarily invests in later stages of a companys life, such as expansion or growth stage, late stage, or mezzanine stage. Usually mezzanine stage is when a company is being prepared for IPO or initial public offering. Furthermore, if you are liquidating another way besides going out to be publicly traded in the stock exchange as you would in an IPO, you will need investors who work for a private equity firm that specializes in leveraged or managed buyouts.

Geographic Preference

Geographic preferences are also important to look at. There are many ways an investor can determine his geographic preferences, some of which can range from where they live, what region they have expertise, etc. Smaller investors will usually invest in smaller regions, near where they have their offices. Others tend to invest in areas where their partners have expertise. Some investors might have cultural, industrial, and political expertise in a particular area and hence that investor will only invest in that area, because thats the area where he knows the risks and profits the best. Other larger firms tend to invest in larger geographic regions. These larger regions can include a region that includes five or more different countries, an entire continental region, or if it is a mega firm, it could even invest globally. You may have a great company and your company stage may fit an investors stage preference, but since that investor does not invest in your area, he will not look at your plan. This is why its important to know geographic preferences. The best way to figure out the geographic preference of an investor is to see where his headquarters and branch offices are located. This can give a general indication on where an investor is more than likely to invest.

Industry Preference

Industry preference is a very important factor to look at when looking for prospective investors to invest in your company. Investors have spent quite a bit of time in the corporate world before they began to work as an investor, so they usually tend to invest in the industry they know best. This usually means that if an investor has spent time in the life science or medical industry and partners with other investors with the same or similar expertise, they will more than likely invest only in the medical, healthcare, or life sciences industries. On the other hand, if investors in a vc firm have experience in IT, tourism, agriculture, or some other industry combined, it can be possible that that particular vc firm can have a wide variety of industries that it is willing to invest in.

There are several ways you can find out or at least guess what the industry preferences of a vc firm can be. The first one is by looking at an investors list of portfolio companies. What industries are the portfolio companies involved in? Some investment firm websites might tell you flat out in the about us section or investment criteria section what their industry preferences are. Yet this might even be difficult with some other investors.

Investor Activity

Now that you know what preferences an investor has for making an investment, you need to know whether an investor is currently actively investing or not. There could be certain conditions when investors are not active. Some investors will not actively invest when economic times are tough, but others may love the risk and the potential for high ROI in tough economic times. These conditions among others might determine whether an investor is active or not. The best way you can determine whether an investor is active or not is by looking at the news section in his website. Look at the press releases in that section. If the most recent press release is more than a year old, thats a good indication that that particular investor is currently not actively investing.

How Fast Can the Investor Search Process Be?

Im sure you have discovered that going about finding an investor on your own, unless you know what you are doing, can be a long and tedious task. It doesnt have to be that way, but you will have to pay some money for that, however. There are many resources online, such as investor databases, out there where you can find all the information that you can use when choosing an investor, including their latest contact numbers. This can also be a problem, because many investment firms get plenty of spam, so they tend to change their emails on a regular basis.

by: Ian Steele

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