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7.4 Make It a Two-Way Meeting
You know that during the initial meeting the investor will be taking
a very close look at you and your proposal. He or she will have a set
of questions they want answers to. But as much as you want the opportunity
to deliver your message, the meeting is not a one-way street. It's also
an opportunity for you to learn about your potential investor. During
the initial meeting, you should be judging the investor as carefully as
the investor judges you. To achieve long-term success, a relationship
has to work both ways.
The meeting will be most effective if you can both anticipate the investor's
questions and get your questions answered. Click on the buttons to learn
what the investor wants to know and what you should know.
What the investor will be looking for in the first meeting:
Who are you? |
- Are you the type of individual I want to do business with?
- Do I believe you are a competent, credible person of integrity?
- Do you have the requisite personal skills to guide the company's
growth and implement its strategic plan?
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What is your track record? |
- What have you done with the company to date?
- What is your track record with other projects or companies?
- Do you have experience in the market you want to take the company
into?
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What is your commitment? |
- Will you continue to have a significant financial commitment
to the company? (One of the reasons some companies pursue new
investors is to fund the buyout of the existing owner. Potential
investors often find this disconcerting. Frequently, one of the
key things an investor is buying is you and your capabilities
as a successful entrepreneur. In other words, you are often the
magic.)
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Do you have a solid management team and,
if so, who is in charge of what, and why? |
- Are all of the important areas covered? (Sales/marketing, production/research
and development, and finance/administration.)
- Are the individuals occupying these positions competent and
experienced?
- What are their individual track records?
- What is the basis for the executive compensation packages?
- Is the size of the management team excessive for the size, complexity
and growth potential of the business?
- If you are an older individual, is there a succession plan for
a new generation to take over your responsibilities? Are there
other individuals within your company who can assume increasing
responsibilities?
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Were the assumptions used to project
revenue growth reasonable? |
- Can you justify your assumptions?
- Are they consistent with historical trends?
- Have you considered various scenarios?
- Is the growth reasonable in relation to what is happening in the industry?
- Is it reasonable when comparing it to the state of the economy or industry?
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Does your company have a competitive
advantage? |
- Is technology a barrier to other companies that might want to
enter your market?
- Is there copyright or patent protection?
- Do you have a unique position in the market or within the industry?
- What differentiates your company or products from your competition?
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Is there a viable exit strategy for
this investment? |
- What are the implications of your proposed exit strategy?
- Are there other available exit options? How viable are these
options?
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How will the financing strategy influence the business strategy?
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- How will my funds be used?
- Will the additional investment assist the company's growth?
- Has the investment been considered in the various projections
and forecasts you have presented?
- Are other investors being approached?
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What you will be looking for during the meeting:
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Does the investor believe that your financial projections are reasonable?
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Sometimes, an experienced investor can give a great deal of perspective on
what private investors want in terms of acceptable risks, required returns,
valuation, amount of financing available, financing terms and potential exit
strategies.
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Does the investor understand your specific requirements? |
Although this matter may be clear to you, it may not be obvious to the
investor. The initial meeting is a way to provide clarification and additional
explanations.
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Does the investor require additional information? |
The investor may want more information before proceeding to the next stage and
may want it to provide clarification before a follow-up meeting.
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Does the investor have access to the type and amount of capital you believe is
needed to fund your project?
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Only clear dialogue will enable you to assess properly whether the investor
shares the same views related to your requirements and has the necessary
resources to match them.
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Does the investor plan to take an active or passive role in the management of
your company?
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Entrepreneurs and investors sometimes have very different perspectives on
the degree of ongoing involvement.
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Does the investor have the experience and the ability to work with your
management team to improve your firm's operating and financial performance?
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Investors may bring with them:
- knowledge of your industry;
- business contacts (including other investors);
- general business management experience.
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Is the investor someone you could talk to about the challenges,
opportunities and threats that face your business?
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Could the investor become someone who could help you by:
- asking pertinent questions?
- helping you discover opportunities and advantages?
- providing you with serious advice on important decisions and
projects?
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