Know Your Investors

Many entrepreneurs ask me about the best way to approach an investor to seek funding for their business ideas. This is an extremely important question, but you would be surprised to learn how many startups and entrepreneurs have no idea how to answer it. It is not uncommon for entrepreneurs to be so immersed and involved in their idea that they neglect to do the research necessary when preparing to approach an investor. When it comes to investing in a startup venture, investors tend to invest in niches and industries that they are familiar and comfortable with. If your idea has nothing to do with these niches, you will not be funded. Investors’ time and money are limited, so they will not be inclined to waste them on an idea they don’t know much about. When approaching an investor, ensure that you keep in mind the following three guidelines in order to make the best use of both your time and the investor’s time: 1. Do your homework. This sounds basic, but so many entrepreneurs discover a prominent investor and contact them with their idea, whether or not that investor even invests in that particular type of business. Conduct research through industry periodicals as well as the Internet. Look for investors who invest in ideas similar to yours. You should also talk to people who are in your industry in order to find out who is investing.

2. Attend industry events that your targeted investors attend. As you conduct research, you will likely find that investors you are targeting attend many industry events. Most of these events will present great networking opportunities with investors, as well as other people in your industry. By attending these industry events, you ensure you are talking to the right people.

3. Get a soft introduction with an appropriate investor. This step is a direct outgrowth of the previous two. At industry events do the best you can to speak with the investor you are courting. This can be something as simple as introducing yourself, telling them what you do, and handing out a business card. If possible though, get this soft introduction through a third party who knows the investor. You will be surprised at how effective these soft introductions can be. They can be the key differentiator that makes an investor pick your business idea over another. By following the above guidelines in the order I have presented them, you will have a leg up on competing entrepreneurs and be one step closer to turning your dream into a reality. T. Craig Bott President and CEO Grow Utah Ventures Salt Lake City

Before it's here, it's on the Bloomberg Terminal.