Raise Money-Know the Investor when seeking invesment capital

Hosted by Ken Honeyman, The Capital MatchPoint, www.capitalmatchpoint.com, 770.433.8250...That's a wonderful question: what about the veracity of our investment team? When a company need our investors, we want them to be ready. And you might say, "For what?" Do your homework on them just as they do homework on you. Due diligence really is a two way street. If you only think it's a one way street when you talk to a capital provider, I'd like you to examine how you can evaluate the funding source themselves. At the same time your business plan is under a microscope, you should be assessing the prospective funding source's strengths and weaknesses.

Consider the following questions I'm about to put out here as to whether the capital firm fits into your current or projected requirements. How well does the firm know your industry? How often does it work with companies that are in a development stage similar to yours? What assistance can the investor bring to you in terms of management expertise, industry contacts, or support services? What's the reputation of the firm in the investment community? If the firm is going to serve as the lead investor, then how effective will they be in helping to attract additional co-investors? Has the firm asked for any special reward or compensation for serving as a lead investor? What effect this will have on the willingness of other co-investors to participate? That's important.

I think one of the biggest things is, will this firm be able to participate in later rounds of financing if the company continues to grow and needs additional capital? To answer these questions, you speak with the owners and managers of other companies in the investor's portfolio. Determine their level of support, conflict, communication. Be sure you talk to both successful and unsuccessful portfolio companies.

Remember, this is not a me against the world scenario. You deserve to know who you're getting involved with too. We welcome questions from entrepreneurs when they're preparing to engage our investors. They can call us at the Capital Match Point because ultimately we're interested in funding success with our investors.

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Education

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