March 28, 2006

Dealing w/ Investors aka “The longest blog ever”

Being a man with no specific trade, I have a variety of tasks with FundingUniverse that help the company, or our service, run more smoothly. One of my least favorite tasks, although I now swear by its importance, is following up with every investor that registers on one of our state-sites.

We make the calls for two reasons: One, we’d like to let our investors know we care about them and would like to help streamline their use of our services. Second, we like to keep our quality investors in good company and our entrepreneurs safe, so we try to screen out fraudulent investors and third parties that are after your money.

After listening to investors’ complaints and suggestions, here’s a few of the things I’ve learned.

Put your self in their shoes. Try to understand where investors are coming from. An investor is usually managing several different things at one time.This makes them extremely busy, and time becomes worth a lot of money.They also take extremely high risks, losing and gaining thousands every day. This makes them extremely critical people, and they’ll tell you what they think.

Make it short and sweet. Because their time is valuable, don’t waste it with unimportant details. The bottom line is, how will giving you a large amount of money increase their assets? If you have a well researched, realistic (ahem, is it wrong to say realistic twice for emphasis) answer to this question, you should be on your way to funding.

Be careful! Your desperation to find funding makes you an easy target for scammers. I get calls from entrepreneurs way too often saying, “Watch out for this guy, I just got scammed.” Angel Investment deals can definitely vary, but they will never ask for money up front, they usually trade it for equity. Although you don’t want to scare away investors by being too pessimistic, have a way to screen the investors (a resume or an outside source).

Isaiah Thomas is a terrible general manager. This may seem random, but not if you consider that Thomas was a creative genius on the court. One of the most important tangibles that investors consider is who is running your company. Running a business is tough, and just because you have a great idea, doesn’t necessarily mean you are the best one to implement it. A well-known, solid management team will go along way when dealing with angel investors.

To conclude, our VP of Marketing Jeff Jordan put the whole idea in very good perspective for me. He said, “If some guy walked up to you and told you he had a great idea, but needed $250,000, how hard would it be for you not to laugh?” How much would you expect from a guy asking for your retirement plan? A good business plan? A thorough back ground check? Ask your self these questions, make the adjustments that you would require, then go out and look for funding. Good luck!

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