WHAT INVESTORS ARE LOOKING FOR
The reality is, many amateur and inexperienced individuals who seek equity investments often find themselves in situations where they are unable to close deals, lose credibility, and are lost in the sea of other “non-performers.”
If you want to close more deals, maintain, and grow your credibility, all the while being able to create value through and through, you need to follow a few steps. It’s important to note that those steps need to be followed systematically:
When seeking equity investors for the deals you bring to the table, what’s stopping the investor from doing this independently? Why should they need you? What exactly and specifically do you bring to the table that cannot be replaced and/or makes it exceedingly difficult to replace? And if you’re unique and irreplaceable, how complicated are you making the deal for the investor to feel compelled, regardless of your value?
Do you have a detailed fact sheet? A detailed fact sheet demonstrates the following elements of every single transaction:
a) What’s the transaction all about? In detail, explain the transaction, what is the business, what’s happening to the business, why the business is being sold, and how you came across the deal.
b) Discuss the financials. What’s the most compelling thing about the deal that you’re getting into for the investor? Does it look like a cookie-cutter template? Is it different from the 3,000 deals that are sitting in front of the investor’s desk? Have you thought it through in a sense of exit strategies, risk aversion, and long-term strategies to improve the value of the business you’re getting into to ensure that the capital invested is de-risked?
c) How much work have you put into the deal? This doesn’t necessarily have to be financial but rather things such as but not limited to; sweat equity, time, resources, and perhaps even value that you may have added to the business from the moment you stepped it to where it is now, in front of an investor.
d) Finally, what’s the game plan with this business? What are your intentions? What are you giving the investor concretely? (I.E -> If you’re looking for debt investment, does the business have assets that investors can file first position liens on? If not, then why would they put their money behind another lender if they aren’t as secured?)
If you cover those above-referenced points, you should be good to get an equity investor. Remember, you’re looking to fill the equity gap, hence, be ready to give up equity based on the reasonable outcome that you wish to accomplish. Getting 1 deal done is better than showing 1,000 deals with none done. As you start to compile your 1 successful into 100’s down the road, you build relationships with investors (which are future financial partners) and they know you’ll bring quality to the table as each deal is well thought out, considerate and investment-worthy.