What Investors Want

Datafordummies · Site Admin

Talking To Investors

You Get One Chance
Once you identify a potential investor, you usually get one chance to pitch your deal. And, he or she will initially spend only 60 seconds to 5 minutes with your business plan. So make it very compelling.

If you get through the 5 minute reading, then you will get a more in-depth review of 30 - 60 minutes. Make sure that you have proofread your plan, and that all the numbers have been cross-checked. Nothing will kill a deal faster that
typos or balance sheets that don't balance.

If you get to the interview stage, dress for success and be sure to have practiced your presentation, including answering off-the wall questions designed to rattle you. If you don't know the answer say so, but do not try to finesse
the question. This is an integrity check, as much as a business plan check.

Are Your Asking For Enough Money?
Have you calculated the amount you will need to take you through each stage of business development? A growing business will continue to need expansion
and growth capital. This is only the first of many rounds of financing you will need.

It can take as much time and effort to raise the $50,000 you may need for seed capital as it would to raise the $5 million you might need for your entire venture. Since, in most cases, you only get one chance, it pays to have all your information ahead of time. And to be prepared with your timeline of milestones and estimates of capital required at each milestone.

Investor's #1 Question: How Much Can I Make?
It's vital to remember that investors are seeking maximum capital growth with medium risk. That means your plan is competing with other investment risks and rewards. In the process of structuring your business plan from a financial
perspective, you will have answer these questions more than technology questions.

1. How much can you make? Is your venture competitive with the returns of the other plans being reviewed?
2. How much can you lose? (including loan guarantees, opportunity cost, and non-financial considerations)
3. What is unique, innovative or technologically different about your product?
4. What is the perceived value of your product versus what your product actually does?
5. Why will everyone want or need your product or service?
6. What will happen to your customers if they don't buy your product or service? Did you create a solution for which there is no problem or market?
7. Who says this is a good investment? What have others said about your business?

How Do Investors Read A Business Plan?
Your potential investors will evaluate the following areas, devoting little more than a minute to each one.

1. Determine the characteristics of (a) the industry and (b) this particular company
- What other similar publicly held companies are in this market space?
- Is there a larger company that is extremely successful?
- Is the company in a 'glamour field' (important to ensure a good public offering)?

2. Determine the terms of the deal
- How much of the company is being sold for what valuation?
- What is the form of debt or equity being requested?
- How will the funds be used? Retire old debt (not a good idea) or undertake new activities that will, in turn, increase profitability?

3. Review the bottom line with special emphasis on years three through five. Either the projections or the past history of the company. The earnings are reviewed to determine the company's valuation.

4. Determine the caliber of the people in the deal (the single most important aspect of the Business Plan)
- What is the track record of the founders and managers?
- How much management balance and experience does the inner management team possess?
- How long have the members worked together?
- Who are the legal, banking and accounting team and what are their credentials?

By William F. (Bill) McCready, Founder/CEO
Venture Planning Associates, Inc.

Many sites tell you WHERE to get funding.
... We show you HOW to get it
For more information visit http://www.VenturePlan.com.