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Thursday, 14 May 2015

THE THINGS THAT TURNS AN INVESTOR ON AND OFF IN ANY BUSINESS VENTURE - BUS 413



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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