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Your investor proposition is like a 3 legged stool 24 July, 2008

Posted by varoom in Business Plans, Investment propositions.
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As I regularly prepare companies for investment readiness I’m asked many times what investors are looking for. This is a tricky question especially in these credit squeeze times. However many significant investment funds were financed before the current crisis and may be in a position to invest if the proposition is right.

So what is the right proposition? The situation varies with each investor, timing of their funding, the mix of their portfolio between risky and conservative, between types of technologies or industry sectors, between companies needing a great deal of management involvement and those with a strong team who are self sufficient.

If we meet the ideal investor with money to invest, a healthy portfolio and management capacity to take on another investment. He’s looking for opportunities where his investment will take the company onto a high growth path at a time where the investment risk is at its lowest.

You just have to make your proposition in terms that maximise the potential for growth and minimise the risk.

Once you have passed this hurdle then you start being judged against many criteria in order for investors to choose between the many proposals they have.

In order to simplify this I’ve conceived an analogy. “Your investment proposition is a 3 legged stool”. If you have a weak leg you risk falling on your Ass.

So I believe the three legs are;

First you must have a market or business opportunity for growth. There needs to be a big enough opportunity, measured in terms of accessible market, market share, market growth or raw business potential.

Second you need to demonstrate that you have already got or will soon build a strong team that can deliver on the potential business opportunity reducing risk.

Thirdly defend your position, in the market, with intellectual property, trade secrets, patents, copyrights, know-how, first mover advantage which prevents other competitors from entry. Reducing risk and increasing value again for the investor.

If you can demonstrate that you have three strong legs to your proposition you may get through to the next round….