3 Questions on the Mind of Investors Before they Invest in Your Business

Before you even think about raising capital for your business, there are three key questions you need to answer from the perspective of an investor. Every individual investor no matter what the size of their portfolio, or area of expertise, will be thinking something along these lines (in their own mind):

1. Will I lose my money?

Guide for business owner:

• Can you show proof of concept for your product or service and is it sustainable?
• What experience do you have within your chosen sector or more broadly as an entrepreneur?
• Who are your key backers, or advisory board members?

2. When will I get my money back? 

Guide for business owner:

• Do you have an exit strategy for investors (IPO, trade sale, share buy-back, etc)?
• What is your commitment to this exit strategy?
• What might interrupt the path to achieving some type of exit (risks)?

3. Will I make money?

Guide for business owner:

• Is your business moving up the growth curve or burning cash?
• How are you going to maximise the strategic value of your business? (NOTE: strategic value is not a multiple of profits)
• Can you name four companies that might buy your business one day?

Assuming you have a unique product or service that has a market, an investor will basically want to see that you have everything at stake. The founding father of venture capital in Australia, Bill Ferris, who now runs CHAMP Private Equity went as far as asking, “Do the owners of this business have their life on the line for this?”. He used this as part of his checklist when assessing potential investment in private companies so it is no exaggeration.

If you can answer the questions above with objective facts then you will be in a much better position to raise capital from Angel Investors, Venture Capital funds, High Net Worth individuals, Family Office trusts, or any other form of surplus capital.