Understanding an investors mindset

As part of my job I'm regularly approached by people who would like us (IRI - visit http://www.irigroup.com/) to invest in their company or business venture. I never cease to be amazed at how many unrealistic requests we get for investment. For those thinking about seeking investment I would suggest that you tune into this show called Shark Tank (US version of Dragons Den)




There are several things that those seeking investment need to understand about winning an investor over;

1. Know your stuff. Know your numbers, know your market, know your customer, know your margins, know your profits, know your customers. Yes, know it all!
2. 100% of nothing is nothing! Think exit price not entry value. 10% of your company for $500k? Your company isn't worth what you think its worth, be realistic about valuations and don't under estimate the value of your investors time, contacts and experience.
3. Cash is King. A good idea 99.9% of the time worth nothing. You'll need capital to take it to market. Sure your idea and hard work are worth something but it's not everything.
4. Treat your investors cash like it is your own. Make sure you spend every dollar like it is your last because it might just be.
5. Show how we will make a return on investment (ROI). You ask me to invest $500k. The cost of that $500k is a significant opportunity cost for your investor. That money can make them money somewhere else if not with you. You need to show why it is you and not the next guy.
6. Don't get greedy! A deal is a deal. Once agreed don't go back on your agreement. If you promise to deliver something then deliver it! Don't come back after the fact to blame everyone else. If the business does well don't come back demanding more equity and returns. You wouldn't be there in the first place if your investor hadn't backed you.
7. Its more than just the money. Chances are your investor is more experienced than you. Listen to their advice, learn from their example. Their opinion matters and their time is valuable.

There are a lot of lessons you can learn about what not to do by watching the very first episode of Shark Tank. http://beta.abc.go.com/shows/shark-tank/ - If your thinking about talking to us about investment I strongly recommend you watch this show first.