When financing small businesses, your business idea must have the potential to return ten or twenty times the initial investment or angel and venture capitalists will not invest. It’s that simple.
Angel investors and venture capitalists are looking for thousands of percent returns on their investment. No, that’s not a typo. They are not interested in better-than-bank-rate type returns, even in this market.
That means if you’re offering a 10% return on their money,which looks great if you are a banker, these guys won’t care.
Early stage investors take a lot of risk for investing in your business before it’s fully proven. They want to hit home runs for taking on that risk. That means they want to earn ten, twenty times return on their original investment.
If you can show how that will be possible, you may just get a few people’s attention. Remember, you’re not the only game in town.
Angel and venture capitalists are reviewing hundreds, maybe thousands of investment opportunities. When they invest with you, that creates an opportunity cost for them.
It means there are other investments they can’t make to invest in your company. You need to make it worth their while.
In Your Corner