Finding Out If Your Investor Is Serious
When you’re at networking events, or even talking to people online, a common thing that you may hear is some interest in investing in your company, often coming from a person who has time and resources that could prove to be helpful. Sometimes, it’s not even a matter of investing – it’s a matter of offering promotions. Either way, it's hard not to have your heart skip a beat when you hear you could get funding fast from some random guy.
If you’re still relatively new to the world of entrepreneurialism and networking, it’s too easy to get excited and believe everyone who tells you that they want to help you. The truth that you will most likely find is that most business owners or potential investors often aren’t 100% serious when they talk about investing in your company or promoting you. So, how can you figure out whether or not the investor is serious? It’s simple. Use these steps, tips, and tricks.
- Take a look at their current track record and reputation. Is this person known for “blowing hot air?” If so, then the investor isn’t (likely) serious. Trying to get funding from investors who don’t have a reputation for saying what they mean, or who don’t have a reputation for follow-through is often a dead-end endeavor.
- Do they ask questions? Real investors want to know what they’re getting into before they open up their wallets. Otherwise, they’ll be very poor, very quick. If they aren’t asking questions, they likely aren’t 100% interested or serious.
- What are they looking for in return? A typical business investor isn’t going to dump $10,000 into a company without getting much in return. It wouldn't make sense. If they are asking for an interest in return, or part of your company, they are in for the real deal.
- What are their credentials? If this is the first time that they are going to be promoting anyone, don’t hold your breath. Similarly, if they don’t have a massive portfolio, they probably aren’t always serious. On the other hand, if Warren Buffett says he’s interested, he’s most likely serious. It’s important to realize that angel investors, as well as a number of other kind of investors, are also monitored by the SEC. If they aren’t SEC-friendly, they most likely are not for real.
- What’s their follow-up like? While there are exceptions to this rule, the fact is that a very interested investor will call you back in a reasonable amount of time if they are interested in you. After all, as an investor, them being able to invest in a business about to explode means that they will get money too. So, if they are really 100% interested, they will return your calls relatively quickly.
- Are they blowing "hot and cold?" Mercurial behavior is a sign that they aren't going to follow through. This is doubly true with business investors. A good rule of thumb is to watch their behavior for two weeks before you start feeling certain of their behavior. If they begin to brush off your talks, they aren't serious anymore or they just lost interest.
If you have spoken to a number of potential investors, and you still haven’t been able to get funding for your business, don’t get discouraged. Even if you are worried about getting business funding quickly, there are still ways to go about things that don’t involve begging every potential investor out there. What may be best for you to do in these cases is to get working capital from alternative sources of funding, and then work on trying to meet business investors later on.