World  Business and Economic Analysis 

Investor,

  • How to Find Willing Investors

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    Big ideas often require the help of outside investors. Here are tips on what they look for and how to connect with them.
    By Darren Dahl


    Most entrepreneurs who dream big simply don't have access to the kind of money it takes to realize their aspirations. Enter the professional investor community. But, in order to get investors to open up their checkbooks, you'll need to convince them that your idea is worthy and also be willing to subject yourself to increased scrutiny and give up a percentage of your company.

    That's why it's a good idea to first ask yourself whether you really need a professional investor at all, says David Henkel-Wallace, a serial entrepreneur who has raised $60 million from VCs. 'If you're starting a web software or mobile software company, you might be able to bootstrap it, which has the advantage that you get to keep all the money you earn,' says Henkel-Wallace. 'You could also look into borrowing from friends and family – or even take out a second mortgage – for the same reason.'

    Dig Deeper: How to Pitch Your Business to Family and Friends

    Understand What Investors Want

    If you decide your business can only get to the next level with the aid of a professional investor, then you need to figure out what a potential backer looks for in a budding company, says Martin Babinec, who raised six rounds of funding through the business process outsourcing firm he founded, TriNet, which now boasts annual revenues in excess of $200 million.

    For one, he says, many entrepreneurs mistakenly think talking to investors involves loans or debt. 'It should be clear that when you talk to an equity investor, you're trading shares of your company that an investor can later sell,' he says.

    To that end, you need to show how your company is on a path to a 'liquidity event,' industry parlance for an IPO or acquisition where the investors get a return on their money.

    Since not every company will actually go down such a path, 'many investors use a portfolio approach, where they hope to spread their risk among several bets,' says Babinec, who now heads up Upstate Venture Connect, an organization that connects emerging technology companies in upstate New York with investors. 'An investor may, for example, invest in ten companies, knowing that more than half of those companies will fail to capitalize on their potential. But, if just two of those bets pay off, and pay off big, then everyone comes out ahead.'

    Babinec says an investor will evaluate a company's potential along four key criteria:

    1. Does the company's product or service address a large and growing market need?

    2. Can the company scale quickly enough to take advantage of that market opportunity?

    3. Does the company have a defensible competitive advantage?

    4. Can the management team execute on the potential outlined in the first three criteria?

    In other words, the risk of investing in your company must be offset by the potential reward that can be delivered when your company experiences a liquidity event. 'If you want a lot of capital, you'll need to demonstrate that your company has rocket-ship growth potential,' says Babinec.

    Dig Deeper: 9 Ways to Make Your Business More Attractive to Investors

    Look for the Best Fit and Make Connections

    If your company passes those four tests, your next assignment is to prune down the list of investors who might be interested in your company. To do so, you'll need to understand that the private company equity markets have become very fragmented, says Healy Jones, a former venture capitalist who now heads up marketing at OfficeDrop, a start-up that offers digital document scanning and filing and raised venture capital late last year. 'There used to be just venture capitalists, now there are angels, super angels, micro-VCs, VC, and growth investors,' he says. 'As an entrepreneur looking for capital you need to know where on the spectrum of investors your business falls - and target the right potential investors.'

    VCs, for instance, typically look to invest $3 million to $5 million. Angel investors, on the other hand, may invest just a few thousand dollars. Private equity groups may have tens of millions to invest.

    So how do you know what the right fit for your business is? Start by networking and building relationships even before you set out to acquire funding as a way to both determine who investors in your area might be as well as to develop connections to them. 'VCs highly prefer introductions to new ideas from people they trust as opposed to receiving cold calls from companies looking for money,' says Jones. 'The best introductions come from successful entrepreneurs, especially ones that have worked with the VC before.'

    Your networking should include professionals working for companies similar to yours, says Marc Wright, a serial entrepreneur, VC investor, founder of an incubator and an advisor to early-stage companies. 'Look for news in your industry about investments and acquisitions involving companies in the spaces closest to yours,' says Wright. 'The goal should be to target investors and even large companies who look for opportunities in your space.'

    Another suggestion from Babinec of UVC is that you can research who originally backed the public companies in your space. 'This is a multiple step process that works you back to the investors who have made money in the space,' he says.

    This is essential because investors like to invest in areas where they have developed expertise, says Eric Lefkofsky, the co-founder of Groupon who, in addition to founding two companies that went public, has now started a venture fund of his own called Lightbank. 'We only look to invest in early-stage tech companies,' says Lefkofsky. 'If you had the best idea for a new restaurant, I'm the wrong guy to approach about it. We focus only on the things we know.'

    Investors, especially in early-stage ventures, also tend to place their bets close to home, according to Don Rainey, a general partner in Grotech Ventures, a VC firm in Washington, D.C. 'Being closer geographically is better, but it also differs on where you are,' says Rainey. 'In Silicon Valley, you might need to be 15 miles from your investor. In Dallas, it might be 300 miles.'

    And don't be bashful about using social media tools to boost your networking efforts, says Wright, who is the CEO of Martinez & Wright, a business media and market data company in Laguna Beach, Calif. 'I frequently use news sources and LinkedIn to find people who are connected to an investor target and then tap them for feedback and input on the business and ask what they think investors or buyers might like and dislike,' he says. 'If the chemistry is right I'll ask them for an intro. And if it's really good, I'll mention the possibility of a formal role as an advisor.'

    Dig Deeper: An Insider's Guide to Venture Capital Financing

    Share Your Vision

    Once you've finally made some connections to investors who likely understand the kind of company you're trying to build, you then need to whittle it down to those who share your vision of what's possible. 'As an entrepreneur, you need to find investors that buy into the assumptions you have made about the future,' Rainey of Grotech Ventures says. If you don't share the same common view of what's possible, an investor won't invest with you.'

    Resources

    The Internet contains many websites dedicated to helping entrepreneurs navigate the investment community. Here are a few of our favorites:

    Startable: A blog penned by Jones of OfficeDrop which focuses on the early stage VC and angel environment and the Internet start-up market.

    Venture Hacks: A good source for fund-raising advice that also includes a list of active angel investors.

    StartupCFO: A source of advice from a veteran CFO.

    VC Ready Law: A blog with good resources for entrepreneurs looking to raise capital.

    Angel Capital Association: A great resource for understanding what an angel investor looks for as well as for finding angels near you.

    The following blogs written by investors also provide worthwhile information to capital seekers:

    Fred Wilson: A well-known NYC-based VC.

    Brad Feld: A good source on angel investing, venture capital and term sheets.

    Mark Suster: A VC and former start-up CEO, offers advice on raising capital and pitching VCs.

  • Are you Investor ?

    b_200_200_16777215_00_images_i-am-an-investor-1-728.jpg

    World Business Year provides a gateway for high net worth individuals, sophisticated investors and business angel investors to access hundreds of exclusive seed and early stage funding opportunities posted from entrepreneurs and business owners seeking funding to take their business to the next level.

    You can send e-mail  to access these investment proposals, and also to receive filtered investment deal flow based on your investment preferences.

    New for 2016. World Business Year is now featuring Property Investment Opportunities posted from Property developers. Register as an investor if you are interested in investing in  Iran  Property Sector.

    Using World Business Year, Investors can access:
     
    •    Seed & early-stage investment opportunities
    •    Seeking Funding for Expansion & growth capital
    •    First & Second Round funding opportunities

     


    If you are looking for Investment Opportunities in different sectors in Iran, please send your requirement to following e-mail:
    This email address is being protected from spambots. You need JavaScript enabled to view it.

  • How To Increase Chances Of Finding Investors

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    Whether you're starting a business or already have an established company, there's a good chance that at some point you will be looking for money, either debt or equity, or combination of both. This article should help to properly prepare the materials presented to investors, thus increasing chances of successful funding.

    Investors have money, but they don't have much time to sit and read through 27-pages business plan. If your initial presentation is more than 2-3 pages long, most likely it will end up in a waste basket. Under best circumstances you will receive a call from investor asking to briefly explain what do you actually want. Therefore, lengthy business plan is just as effective as a business card with contact information. It doesn't mean that eventually you won't need a comprehensive document, but not for the initial introduction.


     

    Do not overburden the document with technical details because majority of investors simply don't care how raw material A transforms to end product B. Majority of investors speak financial language and the executive summary should be written in a language that they understand. Depending on type of financing you're looking for, include only relevant information. For example, if you are going after assets-based loan, include total value of assets, preferably both estimated orderly liquidation value (OLV) and forced liquidation value (FLV), and skip on principals' bios, because they are not relevant for this type of loan. It is also good to know that you can expect somewhere between 60% and 8% loan-to-value (LTV) depending on type of collateral.

    Lets start with 1-5 paragraphs about your project, when it was started and how you've got to this point. Be precise, clear and concise.

    Next, tell investors what you're looking for. What is the total amount? Should it be debt or equity, or both? What are the expected terms? Do you need a lump sum, or can receive money in tranches?

    Now, lets put on investor's shoes. What savvy investors are looking for... what is the common denominator? Simply put, investors are looking for high return on investment (ROI) and low risk. Every project that investor evaluates should pass ROI-Risk test. Therefore, the presentation materials should contain information addressing these two subjects. Principals are usually pretty understanding to ROI requirements and reflect it in the documentation, however risk assessment is often overlooked. Needless to say that very often risk is the decisive factor.

    It is critical for a principal to understand that 100% financing is very, very rare. It comes with hefty price tag and substantial collateral requirement. Usually investors want to see principal having some "skin in the game" to mitigate the risk. It's much less likely for a principals to fail if their own money are involved. Save yourself a lot of time by realistically evaluating the investment opportunity.

    Regarding due diligence fee - be prepared to pay for direct expenses, like travel, food and lodging, hiring local counsel or documentation processing service, etc. Just make sure that such expenses are not padded a lot; ask for due diligence fee breakdown.

  • I am an Investor

    b_200_200_16777215_00_images_i-am-an-investor-1-728.jpg

     

    World Business Year provides a gateway for high net worth individuals, sophisticated investors and business angel investors to access hundreds of exclusive seed and early stage funding opportunities posted from entrepreneurs and business owners seeking funding to take their business to the next level.

    You can send e-mail  to access these investment proposals, and also to receive filtered investment deal flow based on your investment preferences.

    New for 2016. World Business Year is now featuring Property Investment Opportunities posted from Property developers. Register as an investor if you are interested in investing in  Iran  Property Sector.

    Using World Business Year, Investors can access:
     
    •    Seed & early-stage investment opportunities
    •    Seeking Funding for Expansion & growth capital
    •    First & Second Round funding opportunities
    If you are looking for Investment Opportunities in different sectors in Iran, please send your requirement to following e-mail:
    This email address is being protected from spambots. You need JavaScript enabled to view it.

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