How can you attract an investor to your business?

How can you attract an investor to your business?

How can you attract an investor to your business? 1200 630 Colin Kennedy
Image: Business partners high five

Some investors argue they are only interested in businesses that sell widgets rather than services – they want a product, not bodies. Others say that their investment is in the people leading the company.

Either way, you can take hope because it’s clear that no investor is alike, and that means there are no hard and fast rules.

The sale of Jack Millar’s Unfiltered – a business education platform – for $60,000USD is a case in point. New Zealand investors poured millions into a business that was defined – at least publicly – by videos featuring successful entrepreneurs. In the end, they were left out of pocket, and as one investor shrugged, ‘you win some, and you lose some’.

Writing in The Spinoff, journalist Jihee Junn put it best when she wrote: 

“Over the last five years, many of New Zealand’s most highly respected businesspeople lent their names, status and millions of dollars to help Unfiltered chase the dream of becoming a global company. They were motivated not by the prospect of a windfall, but because they liked Millar and they liked what he was trying to do.”

Perhaps Millar is unique, or maybe the story of Unfiltered – although not exactly a happy ending – is that when an investor puts his or her money into your business, they are first and foremost making an investment in the person or persons fronting the enterprise. There will be other requirements for most savvy investors, but you won’t get off the starting blocks if you cannot inspire investor trust in you and your team.

Trust

The charisma of people like Millar aside, passion, personality and liking may play a part in an investor’s decisions, but trust often comes from track record and performance.

One of the first things investors look for in a start-up is the successes and failures of the company itself or the person leading the company. If the company has been around for a little while, they’ll want to see consistency and opportunity in the financials.

Competitive advantage

Warren Buffet calls it a durable competitive advantage: “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

In Buffet’s books, competitive advantage may be low-cost of production from economies of scale or a robust business model, better margins than competitors or the promise of continuing demand.

ROI

To attract investors, you’ll need to show them how you intend to give them a healthy return on their investment and what that return is likely to be.

If you can establish trust in you and your business, demonstrate a clear competitive advantage and show investors how you intend to ensure they realise a return on investment, you’ll be off to a good start.