How Do I Know that An Investor Suits My Company?

As I have written in some of my previous articles, there are different kinds of investors that you can contact when seeking capital for your business.   Some of these investors can be business lenders, venture capitalists, angel investors, and more.   Though you can gauge an investor by what kind of investor he is, that is not enough to decide whether he is good enough for your business or not.

There are several things that you need to take into consideration in choosing an investor to contact after you have prepared your business plan and executive summary.

Stage Preference

An important thing to look at before choosing a prospective investor is to look at his stage preference.  Does his stage preferences match the stage that your company is in?   This is very important.  A company goes through different stages in its life, before it is liquidated and you and your investors make your profits.   If your company is new, you are either in seed or early stage.  This is a high risk to the investor, but the ROI, or return on investment could be very high.   If your company is in its early stages or you are only starting out, you will need an investor who is prepared to take such high risks and specializes in seed or early stage companies.   Another company may already have been in business for some time and is expanding into different markets, you need to have an investor who prefers to invest in later stage companies.  You can also qualify for a company that is in expansion or growth stage.   Companies who are about to be liquidated qualify for either LBO, or leveraged buyout; MBO, or managed buyout, or mezzanine funding.  These are usually for companies who are either prepared to be bought by other companies or companies who are planning to buy another company.  Mezzanine funding is usually for those companies who are preparing for an IPO or initial public offering, in other words, a company that is ready to placed on the stock exchange.

Geographic Preference

Equally as important as stage preference is geographic preference.  When you are looking for a prospective investor, you want to make sure that that investor will be investing in your geographic location.   Many investors have their preferred geographic locations.   Most investors choose the geographic locations that they are located in or have expertise in.   It is very important that your prospective investor has stakes or expertise in your area.  Other larger investors might invest globally.

Industry Preference

Just as important as both stage and geographic preference is industry preference.  This is very important because investors almost always invest in the industries where their partners have expertise.  Many investors themselves are entrepreneurs and have experience in a given industry.  Furthermore, you need to have a partner who has the same experience as you have.   You can also benefit from this because your investor often has connections in the industries of their expertise.

Finding out the industry preference of your prospective investor may not be vary easy or can be very easy.  The first thing that you need to see is to look at their website.  Some investors have their industry preferences clearly placed on their website, others don’t.  There is also a way that you can find an investor’s geographic preference if they do not state their geographic preferences on their website.  You do that by looking at their portfolio companies.  Usually you can see what kind of industry their portfolio companies are in by looking at their individual websites.

Investor Activity

One of the most important factors of all is that you look at whether an investor has been actively investing currently or not.   You can see this by checking the press releases that are linked to on from that investor’s website.   If you see that the press releases are not only as recent as one year, they are more than likely not actively investing.

What Is the Best Way to Find Out Everything About Investors?

When looking for investors on your own, you can run into all kinds of dead ends.   There are many resources on the internet that can help you find these investors.  One of the ones that I have used is the VCgate Venture Capital Database, which is an excellent resources to find investors.  This database always has the updated information about investors and is a must for all entrepreneurs.  I personally use it myself.  I find it to be a very useful resource in my searches for investors.