You've spent months focused on how to find investors, fine-tuning your pitch and checking all the boxes. You've honed your business model and followed all the steps to become an attractive investment.
But have you considered what to look for in an investor? Before you get attached, make sure they meet specific criteria. Ask yourself these four questions before deciding on a financial backer.
1. What's Their Financial Situation?
The number one question to ask is the question about numbers. Ask potential entrepreneur investors about their portfolio and previous investments.
While it's exciting to have someone show an interest, especially after a lengthy search for capital, make sure they're able to fund the project. Don't just take their word for it. Do some digging.
Find out about previous investments and how they're performing. How much money is available right now? Are they keeping up with their investments or coming up short on cash?
Knowing the details will save you from getting your hopes up for nothing.
2. Do They Have Influence?
Sometimes it's not what you have but who you know. Does your potential investor have any clout in the industry?
If you work with someone at the top of their field, you inherit their infrastructure. You'll have access to marketing, HR, and workspace. It's less expensive to join an enterprise than it is to invent one.
On the other hand, you'll also be inheriting their culture and reputation. Make sure their brand is a good fit for your business.
Step away now if your values are at odds. It's easier to pass on an offer than it is to get out of a bad situation.
Beyond their industry experience, it's a good sign if your backer keeps like-minded company. Who are their friends? A network of venture capitalists is where to find investors for future endeavors.
3. What's Their Appeal?
If you're looking for a team of investors, you have the added task of making sure they all get along. An investor with a divisive personality can deter other lenders and keep you from attracting the right talent.
A likable investor can do the opposite. Someone with charisma and the leadership acumen to back it up can draw people in. Investment is a risk, so it's good to have someone who inspires belief in your proposal.
Not all leaders are good leaders, though. Choose investors who are on board with your mission and understand your vision. You don't want to lose creative control to someone who wants to take over.
4. Do I Need to Diversify?
While you're determining your lineup of investors, look into their portfolios. If any single industry takes a hit, you'll have more security if you have investors with different types of investments.
Diversifying your investors gives you breathing room to keep focusing on the creative.
Make Sure to Ask Questions Before You Find Investors
After enough time in the trenches, any offer can seem like a lifeline. But don't jump in right away. Take your time to find investors that are a good fit with your brand, personality, and your whole team.
Are you looking for backers with a broad range of experience and a focus on inclusion? Send us your pitch. We're committed to giving everyone a fair shot.