We… entrepreneurs are a passionate lot and would like everyone to be as passionate about the products or services that we are rolling out into the market. This may however lead us to believe that someone will put money in our businesses because they are totally jazzed by our proposition. Tread carefully my friend tread carefully…it’s a capitalistic world and everyone is selfish…selfish has been cast in negative light so may be self interested puts a better spin to it….everyone is self-interested.
Lets begin the lesson
- Investors are not investing n your success but in theirs.
How can they make money by giving you money is the question on their minds. Even if they know for sure that you will NOT make it, they can still pump in money to your venture. Theirs is a financial milestone; hey don’t give two hoots about your making the next Facebook or Mpesa.
- We like to assume that investors are partnering with us for our success.
As I noted in point one…self interest is paramount. They can make money even if you are not going to do so in the long term
- You have to be cash flow positive to be of interest
Investors can make their money whether your laughing all the way to the bank or are in the red hunting for additional capital injection. Its all in the story…they can tell good tales. Clauses in agreements could make it really difficult to structure round two of investments, so do get a lawyer to go through all, your agreements.
- Internal rate of return:
we all want ….rather project that our product or service will have market share X in 123 numbers of months making us the leading or top 10 player our chosen field. Investors are only interested in the market rate of return; give your spreadsheets a good dose of on the ground realism. You don’t want them rolling their eyes when you mention Ksh 100,000,000 million in your first year of operation, unless your sinking an oil well 🙂
At the end of the day, you’ve got your own back chief, work your magic and be self-interested. Here’s to your…our success!