Money for Entrepreneurs

I read an interesting article by David Glass.

He says that:”There are five types of potential investors in a business, Founders, Family, Friends, Fools and Experts. Founders are the individuals who start the company and may have some experience as an investor in a business but most of the time founders are new to getting a business started.

A traditional source of funds for many start-up entrepreneurs is Family, Friends and Fools. The family and friends will invest in you just because they like you, want you to do well, etc. The fools invest their money like a gambler does by placing $100 on black on roulette in Vegas. They don’t know why they choose black – but they hope they’ll make some money with it.

You can raise some good money with founders, family, friends and fools, but most of the time it’s not just about the money but rather the team of people you are putting together to start and grow your business. This is where the experts come in. If you are looking for investor money it’s important to know how to get to the experts and what to say once you are there. Expert investors are Angel Investors and Venture Capitalists. I would stick with the angel investors to start. There are a lot more of them and they are easier to get to than a Venture Capital firm.

There are television shows now even showing people presenting to investors – The Shark Tank just came out and has entrepreneurs presenting their business to a panel of five investors. The investors have all made millions starting their own companies and are now looking to have their money work for them in other ventures. They are experts – but the real winner in a show like that is the producer, Mark Burnett. He gets 3% of gross sales from anyone who wants to audition for the show. That’s right, just to audition you need to give up 3% of all your sales.

It can be very expensive to work with investors and if you have a great idea but little experience or knowledge of working with investors you could get eaten alive. Thus the name: The Shark Tank.

Here are a few questions an expert investor will likely ask you. Be prepared to answer these in your presentation or after.

Does the company recognize competitors?
Does the company control a first-mover position?
Does the Board of Directors have a diversity of skills and background?
Has the management been previously funded?
Has the company articulated the use of raised funds?
Has the company considered a reasonable exit strategy?
Do the product/services solve a current market issue?
Are there unique attributes to the product/services which provide market differentiation?
Is the market adequately described?
Is the market realistic?
What is the size and scope of the market?
Is the market considered a growth market?

There are many more questions that you can be asked and should be prepared to answer. If you ever do get in front of an expert investor be prepared. If you aren’t, schedule a time to present to them in the future. You wouldn’t want to waste your one opportunity.

David Gass – Founder
Business Credit Services, Inc.
www.bcscredit.com

http://www.bcscredit.com/blog/?p=218