As discussed earlier in my own previous articles, you can find all kinds of different investors around for the entrepreneur to select from. We’ve already covered the kinds of investors you can find, which is often business lenders, angel investors, institutional investors, or venture capitalists. This is really a broad range of investors that you may see. After you have your company plan and your executive summary ready, you’re now ready to get the proper investor to request capital.
There are many factors that you need to consider before actually contacting your prospective investor. There are lots of things you will need to look into, such as for example stage, industry, and geographic preference. Furthermore, you should also look at their portfolio companies, who they’re and what they do. You will dsicover this below.
Basically, stage refers to the stage your company is in. If you should be pre-prototype, or your prototype has just been developed, you’re either seed stage or early stage. infrastructure equity These stages are usually the best risk stages for investors, but their ROI, or return on investment could be very high. On the other hand if your company are at 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 need an investor who is most likely a venture capitalist and specializes in high risk investments. On the other hand, if you’re an organization that is already established and needs bridge funding or expansion funding, you will need an investment firm or a private equity firm that specializes in the later stages of a company’s life. What this means is that 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 who’re ready for a liquidation event, where in fact the investors exit and make their profits. Which means that these companies can be either associated with a leveraged buyout or LBO, or even a managed buyout or MBO. Mezzanine stage is when a company is ready for mezzanine capital. This is actually the capital an organization needs because it prepares for an IPO or initial public offering. This really is also a liquidation event.
Geographic preference is just as important being an investor’s stage preference. Your company may fit an investor’s stage preference, but you might not be in the proper geographic location a particular investor might invest in. You can find 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 example Uncle Vasya Ventures may purchase Eurasia, which will encompass Russia, Central Asia, the countries which 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 need to learn where their geographic preference is. Sometimes that is shown on the websites, and sometimes not. A great way to find out what geographic location an investor prefers is by looking at its portfolio companies and the countries where they’re located.
Industry preference is equally as important as the both previously discussed preferences. Usually investors purchase the industries that their partners or portfolio companies have expertise in. When trying to find an investor, you will need to look at the industry that you’re in and you want to have an investor who gets the expertise in the same industry that you’re in. You can have an excellent product, but if you’re 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 done by first looking at their portfolio companies, and sometimes, the industry 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 view of what industry preference confirmed investor might have. It’s essential that you find an investor who’s preferences meet your company profile.