Forums: Discussions for entrepreneurs and small business.

The real question is how do you get your idea in front of wealthy investors.

Anyone have *the* answer?

RichSUN,

Since capital sources are not a homogeneous group - there isn't "the" answer for reaching them anymore than there is "the" way to get customers.

Getting your idea in front of wealthy investors isn't (in and of itself) likely to produce the end results you desire.

It's reaching the "right" people with the "right" message describing the "right" opportunity is key. Part of the process of becoming Capital Ready would determine all of the "rights". Another part should build the path to the "right" people.

Although I fully understand that reaching capital sources is necessary - getting your idea in front of wealthy investors may be difficult without preparation and a game plan that includes some target selection.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

There are different options, Rich.

 

I think, first of all it’s important to understand that there are different types of investors.

 

Institutional Investors such as venture capital firms, pension funds, and investment managers usually consider investment opportunities that match clearly defined investment criteria. The reason for this is two-fold: (i) they invest other people’s money, which is usually provided based on a certain risk tolerance and financial return expectations, and (ii) they tend to make investments in areas where they have a certain amount of expertise, experience, and in-house resources. This enables them to add value to their portfolio companies down the road besides providing vital capital resources.

 

Unfortunately, just because these institutional investors are relatively easy to identify, this doesn’t mean they’re equally accessible to funds-seeking entrepreneurs. With other words, it will pay to do your own due diligence on them and seek out firms that (i) have invested in your industry sector, (ii) work with development-stage companies, and (iii) are located within a half-a-day travel radius. If you’re reasonably certain that you found a good match, pick up the phone and try to strike up a conversation or send an email to the appropriate partner. Mailing out your business plan to a number of different firms is usually just a waste of time and money.

 

Angel Investors tend to work based on a similar profile with the important distinction that they invest their own money. Their investment strategy often enables them to work with streamlined due diligence procedures, make smaller investments, and consider a broader range of investment opportunities. Although it goes without saying that they’re a far cry from being “Angels”, they often work with less stringent investment criteria and more reasonable financial return expectations. They also tend to be more accessible than traditional VCs. Many of them have websites that offer useful information on what type of investment proposals they’re interested in and in what ventures they invested in the past. Again, do your due diligence and try to feel them out before sending them your summary or business plan.

 

High-Net-Worth Individuals are probably the most elusive, but also the most attractive target for funds-seeking entrepreneurs. The reason for this is simple. They usually hold an upper- or top management position, but they are not professional investors. They invest their own money but they don’t work with pre-defined investment criteria. Their financial return expectations are rather modest (e.g. a couple of points above major indexes) and they have no interest in playing an active role in your company. On the downside, if you require experience and expertise besides a capital injection you’ll most likely be left to your own devices. They are also much more likely to invest based on impulse rather than on established facts, insights, and due diligence. With other words, if you approach them with an investment proposal that they can understand and relate to, you’re in good shape. They’re also more susceptible to investing in glamorous ventures such as motion pictures, restaurants, fashion, and the like because of the bragging rights that go along with it.

 

Most of them have set aside a certain amount for investment purposes, where they are prepared to accept a higher risk, perhaps even a total loss of their investment, in hopes of achieving a larger financial return than with traditional investment instruments.

 

So, how do you identify, strike up a conversation, and ultimately get them to invest in your venture? Well, the opinions differ in that regard. Back in the days where broker firms had an actual retail floor, it was common for novices to work the phone book. Think of the letters “A” as an attorney or “D” as a dentist or “P” as a physician.

 

Fortunately, the digital age affords us much more sophisticated research tools. Think of real estate for example. You probably live in a town or city where there is at least one affluent neighborhood with bigger than average houses. Would you be surprised to learn that simply by logging on to the property appraiser website, you will most likely be able to get the names of the people who live in these houses? It’s all a matter of public record.

 

You could also look up FAA registrations to see who owns a private aircraft. The same technique is likely to work for recreational watercrafts (in most states).

 

We have explored many of these research techniques ourselves during the capital formation phase of two of our own private equity funds and decided to share these insights with you.

 

Our white paper “How to Reach High-Net-Worth Individuals with your Private Placement” is available at: http://publications.fastventures.com/reaching-high-net-worth-individuals-with-your-private-placement.

 

It’s a comprehensive step-by-step decision making guide that navigates you through all critical elements of raising funds from high-net-worth individuals. It includes a number of unique research techniques to identify high-net-worth individuals, introduces different approaches to connect with them, it even includes sample marketing material. Equally important, it also helps to avoid some of the common pitfalls in the capital formation process, including so-called matchmaking sites, surface skimming professionals, and the like.

 

Perhaps I should conclude this post with a brief mention of what doesn’t work. In more than a decade that I’m in this business I have to yet to see a website that has succeed in matching funds-seeking entrepreneurs with investors. While this initially sounds like a great idea and valid business proposition, most investors are overwhelmed with unsolicited finance requests anyways, so why would they need to sign up for a web-based service to get even more? Please keep in mind that most professionals tend to cherry-pick suitable candidates and approach them themselves. In addition, most operators of these sites simply aren’t qualified to provide meaningful opportunity screenings. So, don’t waste your scarce resources on promises such as “We have thousands of investors who are eager to invest in companies just like yours”. It’s usually a waste of time and money.

 

If you’re interested in striking up a conversation with me, please feel free to send me a PM and I will try to give you a few pointers.

 

I hope this helps. Good Luck!

 

 

Mark

 

 

 

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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com