Financing Your Growing Business - Part 3 - Wooing the Investor
This is the final post in a three-part series this week on how to obtain private sector funding for your growing business.
Once you have prepared the best investment proposal for your needs in the quest to fund your growing business, you will be ready to court prospective investors. Risk financing may be provided by friends and family, angel investors, venture capital firms, institutions and government or major corporations; take the time to find the best match for your needs.
Because there is much at stake for both sides, each party should obtain the pertinent information. Useful items for discussion include:
- The investment of your personal capital into the business, which shows your level of commitment
- Your business' position in the market and its competition
- Your competitive edge and strategies
- What the investor will get out of the investment: risks, rewards, exit strategy
Ideally, if you trade any amount of control for an injection of capital, you should have access to more than only your investor's funds. The time to ask for what you need is during negotiations. Why hesitate to ask the right questions of any interested investors when you know that they, in turn, will conduct a thorough investigation of your business?
You may want to ask some of the following questions:
- How can the investor's industry experience help your business?
- What other assets and resources can the investor offer your business?
- Will the investor provide mentoring and coaching?
- Is the investor able to provide leads and connections?
Use the investor's strengths to your benefit. Assess the deal from various angles; after all, a strong relationship with your investor is an advantage for both parties. Always keep your company's future in mind - it is prudent to leave options open for future fund-raising.
While your investor is carrying out any due diligence reviews, examine the deal's legal implications, as well as government regulations or existing contracts that could also have an impact. It's good to have all loose ends tied up before closing the deal.