What Investors Want
What Investors Want
So much is made about what investors want that it’s easy to lose site that investors are just people who are looking for a great deal.
The strongest matters in my opinion are ones where the proponents offer the least information themselves and rely as much as possible on third party supporting ‘evidence’ or opinion.
The weakest matters in my opinion are ones where the proponents try to sell or worse yet, oversell. This is where proponents start venturing into risky territory by offering statements in their document that start a definite course toward misleading, and worse case deceptive behaviour.
Direct market feedback on whatever is offered is best – actual sales rank highest followed by agreements for future sales and then MoUs. A customer voting with their wallets is a strong signal to investors. Understandably, some offers are pre commecialisation and need investor funds to commence selling. Here, it is worth the effort to seek market interest in a product through MoUs.
Where financial projects are offered, those prepared by a qualified accountant are best with those prepared by proponents themselves ranking second best.
Valuation is where most matters simply fall apart, fall over or fall down. There is no hard and fast rule and one may argue for whatever valuation provides a means to the end they seek. This is where proponents are well advised to look to third party evidence or opinions. Look for comparative sales in the industry for business of a comparative size and similar stage of life.
Securing investor funds for start ups is the most challenging because the path to profit is off in the distance and obscured by one of many events that can either derail or catapult a business. Here, the one tool a proponent has is transparency. Total, 100% transparency. Do not try ‘sell’ anything. Rather, put forward the yet to be assembled pieces and describe why you think this an opportunity exists that may be explored.
I often see a lack of respect for the downside and in most cases, some generic risks are put forward. If a prospective investor can identify risks that a proponent has not disclosed, what level of comfort does that give the investor in that proponents understanding of the business?
For an investor, likelihood of capital preservation is assessed way before thoughts of capital (or other) gains enters the mind. What margin of safety is on offer? Is there a plan B? Is there anything that can be sold such as IP, etc in a fire sale?
So what is a ‘great deal?’ If there was a great deal formula I’d try to patent it and license it out.
You see, value is subjective. Thus, it is wise to offer a wide range of varying and unrelated, third party perspectives and opinions about the matter on offer. It’s about making it easy for an investor to undertake their assessment and this is the key to doing just that.
For assistance please contact The Financial Writing Company 1300 477 210.