First Contact...Now What?
When you decide to join a funding network that has been accredited by the BBB, you will first create a profile and make some edits to your business plan to hone your funding request. After the business plan is uploaded, it's time to begin communicating with investors. So you wait for investors to show interest in your request and eventually that is exactly what happens.
The first investor contact provides an initial only for the last name and the full first name. A second investor provides a business name. The third investor leaves a first and last name, but there is no company name. The fourth contact is the only one that leaves a telephone number.
Now what do you do?
The Next Step...
The first step is to consider the types of investors that usually join accredited funding networks. Funding networks are attractive to funding providers because they simplify the process of locating quality start-up companies. The investor doesn't have to wade through dozens or even hundreds of funding requests that are of no or little interest. It is up to the investors to decide on when and how they want to promote funding availability and will often maintain anonymity until locating promising investments.
Investors also have the option of requesting that you mail, post online or send an electronic version of your business plan. You may be asked to send the business plan to an email address. Some investors will hold off requesting an emailed copy until able to obtain additional information about your business goals. The goal is avoid wasting time on requests that are unlikely to be funded.
To Non-Disclosure or Not to Non-Disclosure...
A common concern of entrepreneurs is the possibility of someone stealing their idea. You send your business plan to a potential investor and now he or she has your "secret". This is an honest concern, but that is precisely why you are using a BBB accredited funding network. The investors who join this type of network are looking for real opportunities that will provide a hefty return on investment. They must look at a number of possible deals to find the right one. Their goal is to earn money on legitimate businesses through investments and not by stealing ideas.
You have the option of requesting the investor sign a non-disclosure agreement (NDA), but don't be surprised if the investor refuses or counters with one the investor normally supplies.
Pre-Qualified Investors Add Trust
There are plenty of funding networks you can access, but most of them should be avoided. What you want is a trusted funding network that pre-qualifies its investors. Pre-qualification includes interviews by telephone and verification of legitimacy through internet research. The pre-qualification process is purposely not too extensive because even small investors are encouraged to join the network. An investor with $20,000 to spend on a business idea can offer much needed funding to small businesses. The limited pre-qualification process also enables larger investors to remain anonymous.
The limited prescreening interview and research will eliminate most of the scammers trying to use the network for advertising purposes or to collect fees. It is always up to the business person to practice due diligence though and not pay any upfront fees until completely comfortable this is the real deal.
The types of funding providers found on a trusted and accredited funding network are varied which is why they are beneficial to those needing funding. These investors include Venture Capital, Individual Investors, Angel Investors, Foundations, Institutional Investors, Brokers, Banks and even Micro Lenders.
Verifying Investor Legitimacy
There are signs that point to the fact an investor may not be legitimate, and you must learn to recognize them. One sign is the lack of successful investing history. Another sign someone is not legitimate is when you are unable to find any information on the business after contacting the country or state in which the business is registered. A third sign, as discussed, is an investor that demands an upfront fee. It is important to note though that successful brokers may require a small fee upfront, but if you did your research, the broker has been verified and has a proven track record.
As a means of protection, people seeking new funding will hire an experienced attorney to complete some research on likely investors before accepting any money. This will help you avoid getting caught in a shady deal or one that is too expensive. Large deals that are worth over $1 million will usually require that you pay some type of fee into an escrow account. This money is held while the in-depth research is completed including appraisals and title searches. If a fee is paid, the written agreement should clearly state the terms under which the funds will be returned.
Prepare in Advance
The postings you have placed online defining your business needs should clearly state the terms you are seeking. In this way, when you contact the interested investor there is no misunderstanding as to what you are looking for in the way of funding. An investor may decide to negotiate new terms, but you will be able to defend your position based on the postings.
The key to success is being patient. Let the investor take the lead because you may discover an even better deal than you had imagined.
Get more info about communicating with investors for your business venture at the Funded website or visit the Funded blog at http://www.funded.com/blog.
No comments:
Post a Comment