Private companies use many different strategies to attract investors; some are sales gimmicks, and some are based on solid business practices. Professional investors look at many different things when determining if a company is a “fundable company.” Venture capital firms are comprised of groups of investors. They provide funding for start up businesses after researching the business model, competition, and potential market share.
There are several things venture capital firms and private investors take into consideration when looking to invest in a business including:
- Business Plan. Having a solid business plan is an important consideration for venture capital firms and private companies before investing. When crafting a written business plan, it is important to remember that punctuation and grammar count. An investor will take your business idea more seriously if your business plan is well thought out and complete and answers all questions before they are asked.
- Experience. Investors are looking for experienced businesspeople that have been in the industry for quite some time. While some will invest in the young entrepreneur, many are still looking for the experienced business professional who is working with the young hot-shot to balance out the experience gap.
- Competition. The venture capital firm will want to know you have done your homework and researched who and what your competition is. Showing a thorough knowledge of your competition, and how your product or service is superior to the competion’s, will set investors minds at ease when looking at your business plan.
- Business Type. Many venture capital firms focus on one type of investment. It is important to understand what industries the firm, or individual you are speaking to, invest in. If you are selling items for children, you should look for investors that specialize in funding children’s products.
When looking for businesses to invest in, each individual or firm will have very specific ideas about what is important for their personal investment strategy. Some things, like the business plan, study of the competition, and type of investment, seem to be the most relevant topics to all investors, no matter what industry they invest in. While investors are looking for the next million dollar idea, they are also looking for ideas that can change the world or culture. Whether the investor is a private individual, or part of a large venture capital firm, they are looking for passionate and driven entrepreneurs that can offer a profitable business investment.