‘Til Success Do You Part: Choose the Right Investor

Posted on 14. Jan, 2011 by Luke Etheridge in Business, Entrepreneurship

When you’re starting out, you need money – While you might have the best idea in the world, you can’t get a business off the ground without cash – and often, lots of it!

True, you could be one of those companies that maxes out their credit cards and tries to use all of your personal resources because you believe in your company. But where does that leave you if things don’t work out? In a difficult situation, that’s where. Assuming you don’t have a spouse or a family that can support your less expensive venture, it’s time to think about approaching investors. However, just like choosing your spouse, you don’t want to end up in a divorce. ‘Til success do you part – that should be your motto with investors.

Be Honest About Your Needs

Talking to investors means coming up with a question for them to answer – Are you willing to invest X amount of dollars in my company? If you’re simply asking them to support you, they might agree, but you may also not get the check in the mail. From the very beginning, before you even create a list of investors, you need to come up with a list of your needs. You need to know what you want before you start the negotiations with the other side. When you clearly outline what you expect from the relationship, the other side will know what they’re getting themselves into as well.

You might talk to the investor about:

• Money you need.
• Resources you require.
• How they will be a part of the business.
• How they will NOT be a part of your business.
• What you expect in terms of the relationship’s lifetime.
• What you will want, should things need to end.

Yes, you’re asking this company for money, which does put you in the position of being less powerful, but that doesn’t mean you should accept money from just anyone who wants to give it. You know there are strings attached with money, but you can also be in control of what those strings are. You should agree to be strung before you actually are.

Realize that Business Divorces are Stickier

No matter how clear your contract or your agreement might be with an investor, you need to know the truth: if they have more money than you, they have better lawyers than you do. Better put, it will not be easy for you to ‘break up’ with an investor. You need to make sure that you research your investor for a long time before you decide to choose them for your business needs.

Think about:

• How their past investments have worked out.
• Whether you click with them.
• Whether you can agree to the strings.
• Whether you feel you can be a part of their life for a long period of time.

While it’s true that you should look at every investor as a lifelong partner, once you begin to be successful and you can return their investment, you might not want them around. You might want to strike out on your own. If this is the case, and you know you want this to happen, make sure you’re with an investor that can support this future need.

It’s Not Just About the Money

The money you’re getting from an investor is terrific, but the more money you get, the more they will expect from you. Instead, look for investors that are interested in what you do. They’re the ones who will help you out when you need help and they will listen to your needs when they change (and they will change). Think about who you want to partner with for the long haul. If you can’t picture staying with them, then it’s time to find someone else…

…and there are plenty of investor fish in the sea!

Have you partnered with a business or somebody in particular recently? We love to read your comments (below) and each of your own stories, so please let us know what kind of planning process you went through in order to come to the decision to choose your particular investor or partner.

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Tags: Business Investment Tips, Choosing an Investor, Choosing the Right Business Partner, Constructing a Partnership, How to Choose the Right Investor, Investors

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