Editor’s note: “The Angel Connection” is a regular feature in WRAL Local Tech Wire. LTW asked consultant Bill Warner to share with readers advice for entrepreneurs seeking investment. He is chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast. The Angel Connection is published weekly.
RESEARCH TRIANGLE PARK – Too many entrepreneurs underestimate the potential importance of their investor’s role.
In order to be successful, an entrepreneur needs a good business proposition and the money to finance it. Both are equally important in every respect. Some entrepreneurs think that the investor’s role is much less significant than the entrepreneur’s. After all, the entrepreneur had the idea and is doing all the heavy lifting. The investor is only writing a check. This attitude is both insulting and demeaning to an investor.
The entrepreneur is forgetting that the investor has already done a lot of heavy lifting to gain the money with which an investment can be made. If the entrepreneur does not show fairness in sharing ownership of the company commensurate with the risk that the investor is taking, and is unwilling to utilize the talents and influence an investor brings to the table, then the deal will not happen.
Keep the Investors Role in Proper Perspective
Think about this. You have gone through an analysis of all the financing alternatives that are available to you and you have concluded that you need private equity investment. That was an important decision where, for good reasons, you decided to select the most expense form of financing and where you will be essentially taking on people who will be your business partners for the life of your company.
This is the last choice in a spectrum of many financing alternatives you considered. In other words, you need them because they are the only form of financing that is available to you and, without them, you will not have a company. From this perspective, your investors are just as important as the entrepreneurs.
Treat Them as True Partners in the Business
The chances are that your investors know more about starting and running businesses than you do. If you come across as arrogant and not willing to consider their advice, they probably won’t invest at all.
On the other hand, if you are truly open to different perspectives and advice on solutions that you had not thought of, you will have the makings of a strong partnership with your investors. You really want to get every ounce of solid insight and wisdom from them as you can. You want them to open their contact lists to lead you to potential customers, alliance partners, sales channels and other investors.
I know this is common sense, but sometimes entrepreneurs get totally wrapped up in their perspective of the business and are not able see other points of view. You will get tremendous value from investors if you open yourself to their ideas and their potential for business influence.
Keep Them Informed
A well informed investor can pay great dividends. The chances are that your investors are quite active in the business world and are seeing new opportunities every week and making new connections every day.
If you take the time to keep your investors informed about the status of your business operations, especially about sales and alliances, they will keep your business in the forefront of their minds and as a result readily recognize new opportunities that they can pass along to you. Keep them focused on what you need, and they may help you get it.
Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.