What Do Investors Want?

In order to find venture capitalists or other investors who are willing to invest in a "brilliant idea," it is important to understand the transaction from the investor's point of view.   That is, what do they want from the deal?  Generally, they want a sound, long-term capital gain on their investment.  This translates into adequate rewards for the level of risk they are willing to take.  If the investor is a family member or friend, pride in the enterprise might be an intangible side benefit of the deal. Venture capitalists and other investors want a great deal of information prior to signing on to a project.  They will want specific guarantees, and often will require contractual language that allows them to "take over" if the project does not proceed according to plan.   In return, they contribute capital, business skills and expertise to the enterprise.           

Selling the Plan

To be able to convince an investor that a company is an economic winner, one must have several factors firmly in place:  First, the company will need an excellent business plan that gives a clear description of the product or service offered and of the targeted purchasers.  The business plan must describe the size and nature of the projected market and must provide a detailed discussion of the business operations needed to reach that market.  It should include biographies of key management personnel, executive compensation schemes and option plans, as well as a discussion of other staffing needs. The assistance of an experienced attorney may be helpful when developing this very important document.

Investors also look for the following factors: a solid management team; competitive, strong muscle in relation to existing and foreseeable industry challengers; and a business venture with divers and sustainable product offerings, as opposed to a "one-note Charlie" type product line.  It is also important to have revenues that demonstrate the existence of a real business, not simply a brilliant idea.  Investors also want to see a solid corporate entity with a committed set of business professionals already on board, ethical legal practices, and safeguards to protect copyrights, patents, trademarks and other proprietary information.

Venture Forth

In sum, when starting a business the new entrepreneur should surround him or herself with knowledgeable business associates.  This will go far in preventing that original brilliant idea from being tarnished by the complexities of finding sources of venture capital.  In addition, legal assistance will become indispensable when negotiating agreements and, will be especially necessary if the company chooses to go public.  With proper management and attention to detail, starting a new business venture can be an exciting journey.