Private investors seek business
investments with a good opportunity for growth.
These decisions are based on their perceptions
of the degree of risk compared to the likely rate
of return on their investment. Private investors
look for certain characteristics when investing
in a company:
1) |
The idea
must be a viable business concept. Private
investors use their intuition and experience
to look for products or services with a
clearly defined market. However, a well-prepared
business plan will improve your chances
of convincing a private investor that the
idea is economically viable. |
2) |
Private investors
usually require at least a 25% return on
their money. |
3) |
Private investors
like to invest in companies that they can
see and in familiar markets. Therefore,
they usually invest in local companies. |
4) |
The private investor’s
primary concerns are management integrity
and commitment. |
5) |
Angels like the prestige
of owning a piece of a business. Therefore,
image is important. |
6) |
Angels enjoy the excitement
of something new and different. Their hot
buttons are not just the financial rewards,
but may include a sense of civic or social
responsibility. |
Although there may be lots
of high net worth individuals that act as private
investors for small businesses, no comprehensive
list is available. Some of the places to discover
them are:
1) |
The
“family and friends” network
is the first place to start. They want to
help because they want you to succeed. |
2) |
Professionals with discretionary capital
often invest in businesses or may refer
you their clients. Examples are doctors,
dentists, lawyers, accountants, architects,
and consultants. Find lists of these professionals
in the Yellow Pages and the membership directories
of the many professional associations. |
3) |
Any
existing or potential suppliers may be a
source for capital. Their motive may be
to tie your business to their service or
product. |
4) |
Customers
may provide investment capital, particularly
is they depend on your product or service
in order to product their product or service. |
5) |
Employees
can be investors. |
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