For New Businesses: Top Things to Watch Out For When Looking For Investors

As a startup or entrepreneur, you know the importance of attracting suitable investors. Here are some things to look for when considering an investor.

Start ups need money, and if you are like most new business owners, that funding isn’t coming out of your own pocket. While there are many ways to attract investors (whether it is through stock and securities offerings or crowdfunding), it is critical in the early stages that you choose only the most suitable candidates. In your quest for investors, be sure to look out for the following factors:

1. They are excited to work with you.

If you have an appealing start up, investors may be seeking you out. If this is the case, they may even demand to invest. If investors are fighting over you (lucky you), you can analyze the attributes of these top choices in order to get the most out of your investors.

If you are like many companies that don’t initially have such a popular following, there will still be investors who are excited to work with you. Their interest in the wellbeing of your business will translate into a positive relationship with much less drama.

2. They can provide important connections.

Networking is essential for growth and maintenance of any company, big or small. Getting your name, products, and services out there is one of the most difficult things for any start up to do. If your investors have good connections, this is a step in the right direction for your marketing strategy. Conversely, it is important to ensure that an investor’s close connections won’t hurt your brand; you may want to steer clear of investors with risky associations.

3. You are on the same page

Whether you want your investors to know every detail of your new developments, or whether you are looking for the silent partner type, you must make sure that you are on the same page. Investors tend to have strong opinions on how their investments are being used, so take the time to understand their needs and expectations. Just make sure that you aren’t dismissing an investor’s potentially crucial knowledge and experience.

4. They are professional and knowledgeable.

An investor with experience in your industry and a positive standing in the community can only be a boon to your business. Don’t back away simply because an investor has had experience with your competitors; this could lead you to a better understanding of industry practices. Just make sure that you don’t fall into the trap of seeking to take on that investor simply to steal a competitor’s proprietary information!

While professionalism is key to any business relationship, you should also feel comfortable with the investor personally. Make sure that they show honesty, as well as decorum.

Before choosing investors, it is important to provide them with a properly drafted private placement memorandum (“PPM”) that contains industry-specific and company-specific risk factors as well as all of the benefits associated with the investment. For more information on protecting your company and its assets, contact PPM LAWYERS today.

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