There are a million reasons why people won’t invest in your business. Certainly you can give them a million reasons why they should, but one possibility is that your potential investor doesn’t see where they can make a difference besides writing a check. Maybe I’m a control freak, but if I were the investor, I would think my money will fare better if I were able to lend a hand or bring some talent to that would make a difference.
Like a contractor or an interior designer looking at a home to buy — they know exactly what to do and who to hire in order to add value to the home. They have an idea of what it will cost and what the finished result will likely be worth. Others may not see or be able to capitalize on the potential because they haven’t the skills nor contacts to make the most of the project. With that idea in mind, let’s look at your prospective business financing from this point of view…
The investor won’t invest because they can’t make a difference themselves. Can your investor look in their CRM / rolodex and find people they can call to make things happen for your company? Can they steer your product onto the shelves at a big retailer? Can they call in a favor and get you in front of an important enterprise executive? Can a phone call get you a link on a prominent website? If not, your deal may not seem so interesting.
What gets investors most excited is when they can see the potential of your deal AND see the difference they can make in contributing and building value. If an investor can calculate the value of their contribution such that it guarantees their return on investment, the deal can be a slam dunk. It’s one way of protecting their investment, reducing risk and assuring success. (Egos being what they are and people with money often have egos to match, it’s possible the investor will overvalue their contribution, making it even easier to get them off the dime.) The more the investor thinks s/he can do, the higher their perception of the likely return on their investment — they should invest even more! A gambler invited to deal a few hands will likely place bigger bets.
Investors must be more than merely interested to make an investment in your business. They must be excited! Very excited! Finding an investor and unearthing the potential they have for adding value to their money can generate a lot more excitement than trying to convince a reluctant financier of the merits of your deal without their participation. It’s up to you how far you want them to go—all the way from making a few phone calls to running the company. You could even give someone one stock as payment for similar favors, but wouldn’t they want to make even more by owning a piece of the action? Like the contractor or interior designer, they’ll make more money on their improvements if they own the home first.
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