Deals are like buses; one comes along every fifteen minutes. Therefore, as an entrepreneur, please understand that your potential investors have heard numerous pitches lately. From the onset, you are battling uphill. Mind you, investors want deals; they need deals. They need their money to be working for them. Idle money is not ideal money. I have often argued with many of my colleagues that there is far more money than there are good deals. So as an entrepreneur, know that the uphill battle you are facing is winnable. The person you are pitching to wants to invest in deals. The question is, do they want to invest in your deal?
To save you and your investor lots of time, a good first step is to identify your investor and their types of investments. I call this knowing your investor. Nothing shuts down a pitch quicker than someone who starts in with a long-term equity pitch to someone who primarily invests in short term debt. Investment structures are exponential, so knowing the ins and outs of each are not important. What is important is to know the type of investor, their strategy, size of investment, and risk.
For this blog, let’s stick to equity investors. In future blogs, I will address debt investors, strategy, size and risk. A few types of equity investors include:
- Friends and Family – Usually your first investors. Many entrepreneurs are met with resistance to investment from outside sources if the insiders and their network have not participated.
- Angel – Usually a single investor who looks to have their money work for them in unique ways. There are almost limitless forms of angel investment. Many angels can be found through networks across the country.
- Incubator Firm – Found in many areas of the STEM universe, incubators offer far more than money, and should be explored to the fullest extent.
- Family Office – Typically a family’s estate to which is invested in multiple unique ways. Similar to angel investment in that the forms are limitless. Usually an outside person, group or trustee manages the fund.
- Limited Partnerships –Tends to be a mid-range pool of capital in which a few partners invest together. The forms of investment are limited to a few because they need to get consensus from each partner.
- Venture Capital – Be ready. Venture Capitalists are pros. They live and breathe investment. They also tend to deliver expertise and influence that money cannot buy.
There surely are other forms of equity investors. Knowing a few basic groups of investors will help you tailor your pitch to the respective audience. Spend some time learning about the fund before approaching. The more you know about them and if they are a fit, the better chance they will show interest in your pitch.
All the Best,
Matthew L. Schissler