When you're looking for investment partners, you should evaluate various factors beyond the funds they could bring to the table. Pay close attention to other qualities that could signal the potential for a strong partnership in the future (or huge headaches that you'd rather try to avoid). When evaluating potential investors, you should keep the following seven factors in mind so that you can choose individuals who are most qualified to help your business succeed:
1. Sector Knowledge and Experience
Consider investors who can serve as valuable mentors and help your business grow. Question each candidate's understanding of your business and his or her experience supporting similar ventures. Investors who are interested in your business should know your industry, market and competitive climate. If their lack of relevant knowledge doesn't concern them, ask why this is the case.
2. Complementary Skills
What skills or abilities do your potential investment partners bring to the table? Skills and expertise that neither you nor any other member of your current team have can be a valuable bonus, especially if gaining this skill set removes the need to hire a new employee to fill a particular knowledge gap.
3. Compatible Goals
Carefully evaluate how your own business goals align with those of your investor. For example, imagine that you want to grow your company and keep the focus on socially responsible behavior. If your potential investment partner is solely focused on financial growth, your incompatibility could hinder your progress.
4. Compatible Personalities and Values
As a best practice, you should determine what's important to potential investors in their professional and personal lives: the environment, the community, their families, social causes or simply making money? Once you figure this out, you should think about how these values align with your own. If you plan on working closely with your investors, it's important that you get along.
5. A Network of Valuable Experts
What kind of business connections do your potential partners have to offer? If you're hoping for significant growth into a national (or international) market, investors with associates in "the right places" could be worth more than any cash they may inject into your business. Think carefully about who these potential investors know and what it could mean for your company growth.
6. A Network of Potential New Hires
If you're struggling to build a passionate, knowledgeable and energetic team, finding a partner with a network of capable professionals could be just what you need. While older investors may offer a wider network, younger investors may bring key connections to individuals with cutting-edge, specific skills that suit your business growth plans.
The ability to share your current business plans with an investor who offers an experienced, strategic and objective point of view is priceless. Whether you plan to talk over long-term growth strategies or simply the next project, think about how valuable a potential investor's perspective could be.
Most investors got to where they are today as a direct result of their intelligence, hard work and connections. Make sure to evaluate each candidate's abilities in all of these areas before simply saying "yes" to the investor with the fattest wallet.
Click here for tips on how to prepare for your investor meeting.
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