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Analyzing investors and venture capitalists

By Samantha Garner | June 30, 2012

The first time you get “the nod” from a venture capitalist is a real confidence booster. After all, someone else sees value in what you’re doing – so much that they want to give you their money to help you succeed.

But hold the phone. Do your homework before you accept. Assess your investors or venture capitalists for the following:

  • Attitude – Are they going to pass you off to someone else, or do they have a real interest in helping you craft a successful company?
  • Their time commitment – How busy are they? If they’re already sitting on ten boards, you might want to look elsewhere
  • Reputation – Investigate. Ask around. What are they like, who have they helped, and how much grief did they cause along the way, if any?
  • Experience and education – Can they back up their advice with real experience or a strong education in business?

Once potential investors have had a look at your business model or company, be prepared to ask a few questions of your own, like:

  • What do you think of our business model? What have we missed? What are we doing well?
  • Have we missed any competitors in our analysis that you think may be a problem for us?
  • What would you change about the way we’re doing things? Why?
  • How strong is our team? Who or what are we missing?
  • How much do you think our company is worth? How much would you be prepared to invest?
Don’t shy away from asking these questions. They’ll give you valuable insight into your small business from objective third parties – and ones that can make a real difference in your business’ future, for that matter.

Take your time and carefully review the background and track record of all those who wish to invest in your company. What footprints have they left behind? You don’t have to like your investors, but there should be good chemistry between you. If there isn’t, keep looking.

Once you’ve determined that your intended investor or venture capitalist will make a good fit for your business – and vice versa – it’s time to think about your pitch. Have a look at our tips for making a venture capital pitch – and good luck!

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