Learning to Communicate with Potential Investors
When you join a BBB accredited funding network, the work is just starting. It’s an exciting proposition as you create a profile and finesse your business plan. Eventually you will be ready to post your request for potential investors to consider, and will also be ready to provide a business plan as you respond to investor inquires. You wait for a while and the first inquiries of interest come through. This is what you have been waiting for!
As you consider the investor responses, you notice that one of the responses only reveals a first name and last name initial. Another investor has mentioned their company name but not much else. The next two inquiries do provide a first and last name, but no company name and only has given a telephone number.
What do you do now?
Deciding on the Next Step
It’s important to understand the types of investors and funders that join accredited funding networks to understand why you are getting such varied responses. The appeal of these networks to investors is the fact they can find potential deals in an organized manner and without wasting a lot of time on deals that will go nowhere. People and institutions that have money to invest are inundated with telephone calls and written funding requests and most don’t fit their requirements or interests.
The fact that funders who belong to funding networks can enjoy a degree of anonymity explains why many are stingy with their contact information. On the other hand, there are those investors who want to take the opportunity to promote their businesses and the fact they have money to invest.
Be prepared for some the interested investors to ask you to mail a full business plan. You may also be asked to post the business plan online or to email a copy to an email address that is provided. There will also be those investors who won’t ask for a business plan until they evaluate your online request and do some checking on their own as to the worthiness of your idea.
What to Disclose?
One valid concern many funding seekers have is this: Am I putting myself at risk of having my idea stolen by sharing it with potential investors? This is naturally a possibility, but investors are interested in investing money to make money. They don’t want to run businesses (unless they are equity partners), and they don’t want to steal your idea. They have joined a BBB trusted funding network to find the best opportunities to achieve their goals.
You can ask an investor to sign a non-disclosure agreement (NDA), but some will counter with their own agreement or will flat out refuse to sign yours.
Are These Investors Pre-Qualified?
A trusted funding network that has been BBB qualified has been spent some time pre-qualifying those who say they have money to invest. The pre-qualification is naturally limited though so that smaller investors are not discouraged from joining. The process usually involves a telephone interview and verifying websites or maybe checking some references.
The result of this process is that funding networks are composed of small investors who may only have $20,000 to invest and large investors with millions of dollars looking for an innovative business idea or a business offering a high return on investment. The initial pre-qualification process will eliminate the people trying to use the funding network as a means of scamming people out of their money through fees or to advertise their businesses.
Practicing due diligence by spending time researching anyone who claims to be an investor is only good business practice. You should not pay fees until you are comfortable the investor is legitimate.
You can find a variety of funding providers on investment networks. They include Individual Investors, Venture Capital and Investing Groups. There are Angel Investors, Institutional Investors, Micro Lenders, and Foundations. You can also find Equity Partners, Brokers you will pay a nominal prepaid fee to and those that will be paid at closing.
Is the Investor Legitimate?
Is the investor legitimate? That is the real question when you get investor inquiries. Fortunately there are indications that an investor may not be a legitimate funder. For example, an investor may claim to have been in operation for a long period of time, but you are unable to verify that information even through the country or state of origin. Another indication of a scam is an investor who insists on an upfront fee without even researching the deal you are offering.
Of course, complicating all of this is the fact that there are legitimate successful brokers that do require a fee, but it will be small and you should have already verified legitimacy. Because of the complicated nature of business funding, you should consider hiring an experienced attorney who can do the in-depth research you need completed on potential investors. The attorney can also work for an investor to investigate potential investments.
Once you decide an investor is legitimate and the investor indicates an interest in your business idea, then it is only common sense that the investor and you will want to meet. That is particularly true if the investment will be over $1 million. You may be asked to deposit a nominal escrow fee too. If you agree to pay a fee just make sure that there is a written agreement that spells out the final disposition of the money whether the deal goes through or fails.
Leave Nothing to Chance
Once you decide to work with a funding network, you need to understand the importance of clearly outlining your needs and terms in your postings. In this way, when you initiate contact with the investor it is from a position of strength with no secrets. You can defend your position and negotiate with confidence. Just don’t get in a rush and try to rush the process. The investor will be more than happy to decide the next move.
Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need to access a vast network of business people, entrepreneurs, partners and service providers to help you start, finance and run your business, check out http://www.funded.com.
More detailed information and useful advice can be found at
- Angel Investor | Business Funding | Venture Capital | Business Plans
Funded.com connects angel investors, startup funding and business funding with entrepreneurs. Funded.com affordably assists business plan writers create investor ready business plans.
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