Investors look for ideas that are big, doable and profitable.
When it comes to looking for money, keep in mind that different strokes attract different folks. Most investors, be they private equity groups, venture capitalists or angels, have different approaches, styles or sweet spots when it comes to parting with their money. At a minimum, they will look for :
- An investment that is comfortable for them and fits their risk and domain profile
- A project that satisfies a large, growing unmet need
- A solution that works
- Something that is different
- A good story
- Something that has the potential to make a lot of money in the shortest time
- Good management
- Other sources of cash
During my work with www.headwatersmb.com , I"ve identified some others characteristics of growing companies that are not as obvious.
The structure of the capitalization table.
The "cap table" describes how the company has been funded to date, who owns what and how much do they own or owe? For example, it is not uncommon for early stage company management to get money from many small investor family and friends. Multiple people owning relatively small amounts of the company in stock or other claims complicates the cap table and makes subsequent investments by large investors more complicated , though certainly not impossible. You are better attracting a few large investors than a lot of small ones.
Scalability of the business
Congratulations. You've made a workable prototype or sold and shipped an item on the internet. Now you have to make and sell a thousand a month. Does your plan describe how you intend to do that?
People are messy. The fewer the better.
If your business plan calls for hiring a lot of people that adds costs, re-think the model. Internet companies are easy to grow and scale with a few people. Just ask Jeff and Greg, the cofounders of this site and others like it. Craig's list has 8 employees.
Finding early stage investors is never easy, particularly in this economic environment. Put your business plan together so that it pushes the right buttons. If you do, the cash-meisters won't be able to resist.