If your business is a high risk start-up and is only offering a 10% p.a. return it’s unlikely to be considered. The investor could easily achieve a 10% p.a. return without taking as much risk. What you are offering an investor has to be comparable. If you want someone to invest in a proposal that has a greater risk of failure then the upside has to be equally great. If you want an investor’s money for a number of years and do not intend on paying dividends, you will have to pay for the use of that money somehow. So be realistic about what you’re asking for and what you’re offering in return.

And it’s not always just about the money. Some investors will want to be involved in the business. If they have skills that you or your business partners don’t have then it’s worth considering. There are a number of Business Angel networks operating in Australia and elsewhere around the world. They earn a fee for matching business opportunities with individuals who have time, money or both to invest. These networks are well worth exploring.

Venture Capital is another method of financing a viable business. In contrast to private investors and business angels, venture capital investors are typically large institutions and the investments often have a fixed lifetime. A business coach can provide you with further information on venture capital options. Alternatively you could search for more information in the Internet.

Getting involved with venture capitalists is a serious business and one that requires the entrepreneur to be extremely well prepared and very capable. Venture capitalists often receive negative reviews and some refer to them as Vulture Capitalists but they have a difficult job separating the chaff from the grain. Many hopeful entrepreneurs come away from their meetings with venture capitalists licking their wounds having been grilled for hours on every facet of the business opportunity. Venture Capitalists are also notorious for taking a large slice of your business in return for their money so be prepared. However if your opportunity passes the scrutiny and you can agree on how to split the ownership, they can bring expertise and insight as well as the funds required to fast track your success.

If you believe that your business deserves a chance, then it is very good practice to talk to everyone you come into contact with and use your entrepreneurial enthusiasm to get your message across. You might get some negative responses along the way as we did but never be deterred. Look at negative feedback as an opportunity to learn something but never allow it to dampen your spirits. Adapt your approach where necessary and keep on presenting your opportunity to those that could help you. Remember that when it comes to investment, there is only one Golden Rule: Those who have the gold make the rules!

Of course, if the rules they make do not feel right, it is wise to walk away and look elsewhere for a more suitable partnership. Be aware of how an offer makes you feel. Are you excited or apprehensive? Can you see yourself with these partners in two years time? Do you like them? If your gut instinct is saying ‘No’ then tread carefully. However don’t let ego and a desire to control everything stand in the way of your success. Sixty percent of something is always better than 100% of nothing! Be pragmatic about your own strengths and weaknesses and take counsel when you need it.

If you are looking for outside investment, don’t be afraid to circulate your business plan and present it to as many people as you can. Don’t be guarded when it comes to your plans. I met a business owner many years ago that refused to discuss his business concept with anyone even though he was seeking funds and advice. His business is still where it was all those years ago – in his head. There are ways to protect your ideas including non-disclosure agreements and patents but if you need finance to take your business to the next level, your legal adviser will be able to instruct you on how to go about discussing your plans safely. Even if you are not looking for investment or advice, it’s good to practice your pitch regularly and who knows what might come of it or whom they may put you in touch with. The next big break for your business might be just around the corner.

Summary of Key Points

• Talk to everyone; never be afraid to share your business opportunity with others. No one is ‘out of your league’.
• Grab every fortuitous opportunity that comes your way to talk to the right people.
• Take note of your gut instincts and tread with caution when it doesn’t feel right.
• If your business is high risk be prepared to offer a high return on investment. The risk should correlate with the return you offer.
• Expertise and skills are as important to acquire as financial investment so look for investors with complementary experience.
• Sources of investment capital can be found through private investors, venture capitalists and business angel networks.
• Take appropriate action to protect your idea where necessary but recognize that potential investors need to know what your offering!

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