Investing in Start Up Businesses

The Funding & Investors section in your small business’s Marketing Plan will be very important. Your Investors are your most valuable asset, and they can make or break your business. Here are a few important things to remember when approaching Investors.

Funding  Investors

Always have a solid explanation for any Funding & Investors requirements you may have. This means having an executive summary that outlines what the investor’s role will be. A good outline should include: the company objectives, the potential return on investment, and why your business is different than those in your area. Include a project plan with deadlines, as well as a management plan outlining how your team will monitor, track, and report any progress. Remember, Investors don’t want to hear “We are looking for a partner to purchase our firm.”

If you are raising capital from a venture capital or private equity firm, always have your attorney review your Articles of Organization. In particular, the US Securities and Exchange Commission (SEC) regulations regarding Private Placement Offerings (PPOs). Additionally, your banker or bank can provide you with copies of applicable licenses. Your banker or bank should also be able to supply you with a list of investment banks and venture capital firms that have had successful working relationships with you in the past. Your banker or bank will also be able to provide you with a copy of the loan documentation they have processed for you.

The Funding & Investors section in your Business Plan will be a critical element for your investors to see. Be prepared to share a detailed description of your business, its products and services, and how you intend to use the proceeds from your offering. Don’t go into great detail here, but be confident and thorough. If you aren’t prepared to explain all of the details of your business to investors, consider outsourcing the document. Many third party companies exist to write this section for you.

If you have already raised Capital from a private investor or a venture capital firm, be prepared to share the type of return you expect to receive as well as your reasons for obtaining such capital. You may need to include an audited financial statement or an explanation of your business expense and revenue numbers. For example, if you expect to receive a return on investment from the sale of products or services and you don’t have an accurate internal revenue number, you will need to obtain this item from your investor partner. If you are seeking capital for an initial public offering (IPO) of your business, you will need to provide the completed Business Plan along with your registration papers to the Securities and Exchange Commission.

Once you have gathered a group of interested Investors, it is important to know that you will need to have some form of legal documentation to prove that you are a serious business. This documentation will likely need to be provided to the funding and/or investors firm once the investment is complete. Most of the investors offering funding will require a letter of credit from their lender as proof that you qualify for the loan. You will need to provide a business plan that is comprehensive and includes all of the above items. A more thorough explanation of your business can be written by you or a business professional that is skilled in this area.