Most investors will tell you that when listening to a pitch for investment money, the one aspect that’s as important if not more important than the product or service the company provides is the personality of the business owner and executive leadership of the business. Often an investor’s decision to invest in a company is based on how easy he or she thinks the company leaders will be to work with.
If the business owner is slow to accept an investor’s input or to be questioned about the business and strategy for using the investment money, it raises red flags. Let’s face it, if venture capitalists choose to invest in a company, they are doing so with the understanding that they’ll be partners in the business and will help the business succeed through their financial investment as well as an investment of their time and expertise. A couple of keys to consider when pitching investors include:
1. Be open to criticism and questions. In the long run an investor simply wants to understand the business and its potential. If you’re unwilling to share this information don’t hold your breath about receiving the investment money.
2. Be open to an investor’s suggestions and recommendations. These investors may not understand your business and market as well as you do, but they wouldn’t be where they are if they didn’t have good business sense.
3. Understand your market. If you don’t know your market and how you’ll sell your product or service, it won’t take long for an investor to discover your lack of knowledge.
4. Have a clear plan as to how you want to use the investment money. Nothing will drive an investor crazy more than somebody who doesn’t know what they need to get their business up and running, or to take it to the next level.
I’ve seen Tier 1 companies with great products not receive investment money simply because of fears that the business owner would be a nightmare to work with. On the flip side, I’ve seen Tier 2 companies with strong leadership that understand the value of an experienced investor and good partner receive financing, simply because of their attitude and because they were prepared.
T. Craig Bott President and CEO Grow Utah Ventures Salt Lake City