How to find the right investors for your business
By ATB Financial 7 January 2021 3 min read
Receiving much-needed financing from any investor might seem too good to pass up. A word to the wise—not every investor is the right investor for your business.
So now you are probably wondering, how do I choose the right investors? Before you accept anything from any investor, ask them a little bit about their story and why they are making this investment. After all you should know exactly who you are going into business with. With these questions as your starting point, you will be well on your way to finding the investors that will push your business past new boundaries.
4 tips to finding the right investors
1. Know your investor
As much as your potential investors might be asking you about your why, you should be asking them about theirs. Perhaps your vision aligns closely to that of the investor or maybe they believe they can offer you skills and expertise in the areas that you might be lacking in.
Either way, it’s your turn to take the driver’s seat. We have put together a few questions that you should be asking to get you started:
- How many investments have you made in the last year? How much did you invest in each?
- How do you determine if your investments are worthwhile?
- What industries do you typically focus on for your investments?
- Who else needs to approve this investment?
- What are your most successful investments to date?
2. Define your investor’s role
Investors range from those who want input in management’s decisions to those who would like to take a back seat and enjoy returns as they come. If you will be working with your investors on a more day-to-day basis, it is important that you know the role they will be playing beforehand. It’s hard to know where your investors stand without asking, so consider asking one (or many) of the following questions:
- When you make an investment in a new business, do you expect a say in management’s decisions?
- How much involvement would you hope to attain in my business and the strategic direction going forward?
- How frequently would we be meeting if you decide to invest in my business
- How do you typically interact with the business’ owners after you have made an investment?
3. Understand your investor’s expectations
While some investors have a personal interest in your business’ success, most are just looking to make a return on their initial investment. To understand how you can meet (and exceed) investor expectations, try asking questions such as:
- What are your standard terms when making an investment?
- How do you expect this investment to impact your portfolio?
- What metrics do you use when considering a second round of funding on your initial investment?
4. Consider how your investor will align with your business goals
Finally, consider asking potential investors about how their expertise can bring your business to the next level. This will help you to see which of your investors are in it for the long haul. To determine their thought process, try asking:
- What is your biggest concern with how my business is currently operating?
- Do you know of anybody else in your network who would be interested in investing in my business?
- Would you consider leading a financing round in the future?
We know these questions hardly cover all of the information that you would like to know before going into business with someone. Our recommendation is to use these questions as a guide to get you thinking about your decision-making process and to seek professional legal advice from a lawyer before making any sort of decision.
For more information, check out ATB’s guide to growing and scaling a business: infrastructure. Here you will find more tips and tricks about gaining funding and building the bones of your business. Without further ado, let’s get financing!