As mentioned before within my previous articles, you can find all kinds of different investors around for the entrepreneur to choose from. We have already covered the kinds of investors you can find, which is often business lenders, angel investors, institutional investors, or venture capitalists. This is just a broad array of investors that you could see. Once you have your organization plan and your executive summary ready, you’re now ready to find the right investor to look for capital.
There are numerous factors that you need to take into consideration before actually contacting your prospective investor. There are numerous things you will need to appear into, such as for instance stage, industry, and geographic preference. Furthermore, you should also look at their portfolio companies, who they are and what they do. You will see all of this below.
Stage Preference
Basically, stage describes the stage 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. On one other hand if your company is at a later stage and already includes a regular flow of clients, the chance is generally lower to the investor. If your company is either seed or early stage, you will need an investor who is more than likely a venture capitalist and specializes in high risk investments. On one other hand, if you’re a business that is 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 ipe real assets. This implies you will need an investor, who’s stage preference is either later stage, growth or expansion stage, or mezzanine stage. They are usually stages of companies that are 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 each time a company is ready for mezzanine capital. This is the capital a business needs since it prepares for an IPO or initial public offering. That is also a liquidation event.
Geographic Preference
Geographic preference is equally as important as an investor’s stage preference. Your company may fit an investor’s stage preference, but may very well not maintain the right geographic location a particular investor might invest in. There are different investors around the world and small firms may indeed invest in a particular geographic location, whereas a number of the larger global investment firms will invest internationally. Other investors may purchase an entire continental area, for instance Uncle Vasya Ventures may purchase Eurasia, which may 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 ought to learn where their geographic preference is. Sometimes that is shown on their websites, and sometimes not. A good way to find out what geographic location an investor prefers is by looking at its portfolio companies and the countries where they are located.
Industry Preference
Industry preference is equally as important as the both previously listed preferences. Usually investors purchase the industries that their partners or portfolio companies have expertise in. When searching for an investor, you will need to go through 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 may have a great product, but if you’re in the IT industry and you contact a VC firm which makes its investments in the pharmaceuticals industry, your executive summary will not be looked at.
Determining an investor’s industry preference can be done by first looking at their portfolio companies, and sometimes, the preferences are shown on investors’ website. If you appear at an investor’s portfolio, and see what the industries that the portfolio companies are associated with, you will get a view of what industry preference certain investor might have. It’s important that you find an investor who’s preferences meet your company profile.