The main concern you’ll often face as an entrepreneur is how to raise your first round of funding. The norm is to approach a few investors and bring them on board. Even so, some investors may not be exactly the right people you want to work with. So, how do you identify the right investors for your business? These 3 questions should point you to the right investor for your business.
- What is your characteristic bite size?
You’ll generally have an estimate of the amount you expect each investor to inject into the business. And different investors typically put in different amounts. Unless your projected figure is equivalent or falls somewhere around the investor’s typical bite size, it may be challenging to reach a middle ground.
Before proceeding any further into business discussions, find out the investor’s characteristic size of investment. It may not be an exact figure you want, but as long as it falls within an acceptable range, pitch the investor.
- When last did you make an investment?
Venture capitalists generally make investments on a frequent basis. That’s what they do. So, if an investor happens to have not made any investment over a period of months or more, chances are that he doesn’t have the money to invest. It would be a waste of time to present your business proposition to them.
Beware though, quite a number of venture capitalists take investors’ meetings even when they lack the funds. You can also do a background check on the investor using online tools to find information to corroborate what they tell you.
- How does the business fit within your investment portfolio?
You might find no other businesses in the investor’s portfolio that are similar to yours. On one hand he might be less interested in your industry or line of business. On the other hand, he might have just had no chance to venture into that industry. It’s best therefore to really get his side of the story so you don’t run into a conflict.
Here’s something to get straight, VCs are just but one source of capital. If from your questions you don’t find enough of them to finance your business, you can easily resort to non-bank financial institutions such as the First American Merchant that actually offer funding at very friendly terms. Your financing options may include merchant cash advances or ACH loans, whichever you prefer.