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  • 23 December 2014
  • Dr Billy M.

The best time to look for investors

When it comes to raising capital, you can increase your chances of getting funded by investors through a combination of timing and preparedness. Put yourself in the shoes of an investor: What would nudge you to lend your ear, and potentially your purse, to a budding entrepreneur? Because most investors are busy people, and not keen on attending tons of meetings or listening to pitches, you should carefully consider the best time to approach investors and then increase your chances of getting funded by understanding what they typically look for in a start-up or investment opportunity.

What investors look for

When considering whether your company is worth their time and investment, investors will be concerned with market figures, management structure, the details of your product or service, as well as the following:

Once you find an investor willing to finance your enterprise, begin building a relationship immediately.

  • Dynamism. Investors want to see momentum, which can be captured through metrics such as your business revenue, user numbers, channel partners, or a list of the business development goals you've achieved thus far.
  • Organization. Show you have a solid management team in place by presenting their biographies so investors can be confident about your team's experience, qualifications, and ability to manage investment dollars.
  • Market size. Create realistic projections regarding the impact of your venture in the marketplace. Investors want to know you can scale up despite a lean financial start. Be prepared to explain how and why your venture is going to succeed in the market.
  • Equity. Every investor will have a minimum ownership level in mind – ranging up to 20 or 25 percent of your company's total assets, depending on whether they co-invest with other parties.

A note on equity considerations: Some investors may not place emphasis on ownership percentages if they consider your business to be a part of their early-stage investment portfolio, but this is the exception rather than the norm.

A timely affair
  • Once you find an investor willing to finance your enterprise, begin building a relationship immediately. Keep in mind that investors are more likely to be receptive when they are enthusiastic and not distracted by other goings-on.
  • Prepare to negotiate. Business is about numbers, so you're not ready to strike any deals until you can confidently present an estimated value of your company. Once received, most investors will put their money to work in exchange for a large enough percentage of your business. Also, you must be ready to receive criticism about your growth projections, since investors will leverage any inadequacy in order to claim a higher percentage. Set your flexibility limits as to how large a stake you're willing part with.
  • Early meetings. Due to its informal nature, venture capital or angel investment can take anywhere from 6 to 12 months. Be sure to approach private investors at least a year prior to your business actually needing an injection of capital. By meeting with investors earlier, you can manage their expectations and give them them the opportunity to judge your progress and momentum at your next meeting. The timing is right when you can show traction for your business -- evidenced by having a solid team in place along with proof of concept, such as growing traffic, closed customer contracts, or a working prototype.
  • Holidays. December to mid-January represents a much slower period for most investors, but it also means they will likely have more time to read your business plan. Although deal flow for investors normally drops off dramatically around the holidays, the truth is that many investors are still active and may be hoping to find something with potential for the coming year. If you have a sample product, the holidays are the time to present it — or even send it in a gift box.

Targeting investors takes patience, preparation, and proper timing. Before you pitch, be sure that you're ready to present and that the investor is ready to listen and evaluate. Only then should you begin to clearly identify your business's growth trajectory and demonstrate your plan and commitment to achieving stated goals.

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