As a business advisor, mentor investor, I always get the question: How do I find the right investor for the times? How do I track the right investor?
To many, this might seem like the same question, and you could look at it like that because, indeed, they are two sides of the same coin.
How I look at it is finding is going out (or staying home), searching and identifying who the potential investors into your business are while attracting comes after you have found them. It is making them interested in your business.
Looking at the finding as to the first side of the coin, I advise anyone seeking investors to take a couple of steps.
Step 1: Understand your business.
To find the right investor, you must understand your business. What are your business‘s growth plans? Look at 3,5, 10 years down the line and ask yourself, “where do I want my business to be?“
Understand how much funding your business will need to achieve the goals you set out in that period because ultimately, the investor you want needs to help you meet those goals.
It might not just be one investor, it might be several investors through that journey, and without understanding, mismatches are likely to occur.
For instance, if your business has a high growth trajectory in a short amount of time, then you need an investor able and to fund to the extent of the businesses needs as well as support in the business development, network building, strategic advise and hold you and the team accountable to ensure the business can be on track to meet its goals.
Suppose your business does not involve a lot of fundraising and has a slower growth trajectory. It would help if you had a more long-term investor. The investor or group of investors who can walk that long journey with you and support through networks and advice on how to grow the business.
Step 2: Go through investor databases.
Go through investor databases, industry publications, media articles coming out in terms of investors who make investments in your sector or region. Start populating your investor database; this helps you start painting a holistic picture of investors who are out there and active.
Step 3: Carry out due diligence on these investors
Understand each investor’s investment philosophy so that your database has more information and factors that you need to consider as you look for and decide on the right investor.
These include but not limited to factors such as:
Which sectors do they invest in?
What stages of business do they invest in?
What type of business models do they want to do and get into?
Do they want to purely take up a b2b approach or b2c approach or a mix of both?
For how long do they make their investments?
Have they invested in similar or competing businesses?
From an investor’s perspective, the point of money creating an investment portfolio is to have diversified risk and not putting all your eggs in one basket. If they are still attractive, you will need to have a conversation with them and get their position.
You get to know these details through their website, news articles, press releases or having a chat with them. This might ultimately disqualify them from your pool of potential investors or catapult them to the top of your list.
Step 4: Filter your database and approach the high potential investors
After putting more information in your database, filter the names out and decide on who to approach.
To make that final approach might seem like a daunting task; where do you even start? Will they respond? Should I call them or email them? These are all questions entrepreneurs have asked. The best way I advise to do this is through referrals from your network. These are people you know, other entrepreneurs, other investors, your friends, your family, or people you’ve met at ecosystem events.
This helps you skip the flooded inbox that most investors tend to deal with and put you in the front line to have a conversation where you can share your business, be heard, and receive feedback.
Step 5: Have a ready-to-go package for the investor.
Understanding all this will do little to know if you cannot communicate to your business and why they should consider you for investment. As a business, you will have to be ready to show investors your plans, documents, and numbers. The minimum to have included a business pitch deck, business strategy (realistic and not academic), previous financial records, future financial projections. Many other documents will be required before you eventually get an investment. Still, this initial set of non-negotiables need to be in place for the investor to consider moving their interest to a due-diligence, negotiation, and deal closure.
Step 6: Put your business out there.
Despite covid-19 limiting in–person meetings and virtual events having fewer chances to network, putting a business out there can take the form of you being at pitch events, competitions, and listing on startup websites and platforms.
As an entrepreneur, you need to know when to stop as events take a lot of energy and time at events and conferences. The downside of that energy and time you commit to all these speaking engagements, events, and competitions is that they distract you from going on with your business. Investors also see this, and their question will be. “Who is looking after your business?“ and “What is your focus?“. This might turn off a good number of investors.
Step 7: Give the old email a shot.
Send it out, follow up, and remember to be courteous and polite.
If someone does respond, that is great, but if not forthcoming, use your networks and referrals to get to someone you can speak about your application or submitted pitch material.
