Question:
What in your opinion
turns an investor on and off in any business venture?
Answer:
Below are what Turns
Investor on
(1) Evidence
of Customer Acceptance – Investors like to know that a company’s new
products have already being used. Even if only on a trial or
demonstration basis.
(2) Appreciation
of Investors Needs – Investors usually want to recoup their investment
within three or seven years. So they want to see some evidence that
entrepreneurs have thought about how to make this possible.
(3) Evidence
of Focus – Investors want to feel that a company’s funders know which one
or two things the firm does first and concentrate their efforts on them.
Investors know that company’s trying to do too many things won’t do any single
thing well enough to allow for fast trade growth.
(4) A
Proprietary Position - Exclusive rights to a product or process
usually comes in the form of patents: they also may be obtained by copyright or
trademark protection. A company with such protection has an advantage
over its competitors.
What Turns Investors
Off
For danger sings
stand out most to financiers:
(1) A
product Orientation – This refers to a situation where there is a single
cause of excessive entrepreneurial optimism. It is infatuation with the
company’s product rather than with the market for it. Business plans that
devote more space t o describing the product than to detailing who will buy it
and how it will be sold make investors suspect that the company is really just
playpen in which the founders can fiddle with their latest toys.
(2) Projections
that Deviate Excessively from Industry Norms - each industry has a range of
accepted financial results. If a company’s business plan projections that
differ sharply from acceptable ranges in an industry, investors will worry that
the entrepreneur has not done his or her home work or is being unduly
optimistic.
(3) Unrealistic
growth projections – Entrepreneurs tend to have aggregated expectations of
long-term growth. Investors know that and expect it. But when the
projections begin losing touch with reality, all kinds of alarms go off in
investor’s mind. Unless the speculator projections are explained and
argued convincingly in the business plan, investors are likely to be skeptical.
(4) Reliance
on custom or applications work - When a company’s basic product needs to be
altered or especially designed for each customer, potential investors see high
costs and low profits. Specially designed goods or services may be
successful, but entrepreneurs forming companies of this type should expect
resistance when they try to raise investor’s funds.
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