Six Ways to Win the Hearts and Minds of Investors
Some entrepreneurs seem to have no trouble attracting investors, while others—even those with a great business plan—may struggle with it. The reality is that angel investors are human beings, a fact that makes personal traits a critical component of any business relationship even before the investment is considered.
An important priority for angel investors is to finance entrepreneurs that have an unwavering passion and sense of urgency. In the business, this is commonly called “fire in the belly.” If you do not have the drive to succeed at all costs, your startup probably will not survive even if you can secure funding.
Of course, passion has to work in concert with a variety of visible characteristics that indicate that the entrepreneur has the attitude and practical skills to make it happen. Here are some key elements investors look for:
- Communicates clearly. Those who can concisely explain the unique, compelling value of the proposed venture in written and oral presentations (elevator pitch) will be more successful in securing investors. Entrepreneurs should recognize that some investors may rely more on either written or oral presentations but a successful communicator will listen carefully before answering questions.
- Develops and maintains networks. Successful entrepreneurs already have a visible network of trusted suppliers, potential customers, partners, and even investors, all of which are critical to any venture. A successful track record with previous investors will offer a compelling motivation to invest in your startup.
- Demonstrates integrity and honesty. Investors will value those who are willing to provide details of the weaknesses as well as the strengths of the proposed venture and the challenges ahead. This will demonstrate to investors that you are willing to welcome the participation of the angel investor in the company, at least at the advisory level.
- Values intellectual property. Those who can convincingly present a patent, trademark, or other unique contribution that can create equity value, not just current cash flow for the owners, will appeal to investors because this has value now and is critical for receiving maximum value in a merger or acquisition.
- Demonstrates confidence. A calm and self-assured entrepreneur will inspire confidence in investors. Those who can demonstrate the milestones achieved, as well as those planned for the future, provide sufficient grounds upon which to invest in a venture. Such entrepreneurs demonstrate rational expectations and allow sufficient time to find capital, including due diligence time for investors.
- Exhibits realistic expectations. The best entrepreneurs recognize and accept things as they are and react accordingly. They are quick to change their direction when they see that change will improve their prospects for achieving their goals.
At the stage during which the angel is normally investing, the entrepreneur may represent the only factor the angel can rely on to decide whether the deal is worth pursuing because the technology or product may still be at an embryonic stage and there may not be any customers to talk to in order to evaluate the market need.
The investor, in order to eventually be successful, has to identify not only marketable technologies but successful entrepreneurs. Investors will rely on a variety of means to judge potential success but will often try to assess an individual’s internal traits, including honesty, dedication, vision, intelligence, and leadership based on the external factors listed above.
If you think you want to be your own boss and run your own business, perform a careful self-assessment to determine if you have the right traits to be an entrepreneur. It will also help to ask those who know you best and are willing to be very honest with you about whether they think you have the personality characteristics to be successful as an entrepreneur. If your current situation is especially difficult or the future reward is high enough, you may be able to cultivate the skills necessary to succeed.
|Author(s)||Akira Hirai (other articles by Akira Hirai)|
|Original Publication Date||December 7, 2010|
|Related categories||Raising Capital|
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