In recent weeks, more and more individuals have been emailing us asking for investments for their ideas and ventures. The emails typically ask us if we are interested in simply investing without any hint as to the industry, a website, or even some sort of indication as to who we are speaking to. While we don’t ask people to write a book as it would have the same outcome despite the opposite execution, we would like to offer pointers as to WHY people typically invest or don’t invest in businesses or ideas.
There are three main reasons why someone invests in a business. You should make sure that you email, letter, or form of correspondence includes or hints at least at one of them.
A void for capital and resources to scale, not experiment: No one likes to invest in experiments, especially when individuals whose experiments have never turned into successful businesses. An idea is not your idea until it has been executed, and therefore holds very little value in the eyes of an investor.
While many people take risks investing in innovation, those risks are calculated. If you truly believe in your idea then you will have learned to become resourceful in order to bring it to life. Many of today’s best ideas and greatest inventions came out of sweat rather than money.
If you are doing it to make money, and believe it can make money, and yet you have never made money before, then you are a really bad bet and it is more likely that this idea will equally fail especially if you are waiting for money to get started.
Most investors look for belief and conviction through effort and often look at how much you achieved without funds and then assess how injecting you with money could change the results you are getting. Investors are not in the business of testing your idea with their money, but instead are interested in growing your idea through their resources and funding.
In order for a plant to grow, it has to have been planted, watered, and show signs that it can grow. If it does, then more water can be added so that it grow quickly. This analogy can be very powerful when applied to your perspective prior to going and asking for funding.
A killer team, or a talented CEO: Most investments are about a return, or in some cases about scaling for an exit. Very carefully placed investments sometimes are for talent acquisition.
In many cases in the tech industry, we have watched very talented companies get bought out or funded for more than their valuation strictly because of the talent that came with the transaction. Great talent and great leaders are not easy to find, especially those with laser focus and hunger.
Larger VC firms and companies are starting to notice that. Past track record, work ethic, and progress are often indicators of how great a person or their teams are.
Being able to showcase why your team is different and how your leadership is essential could change the outcome as to why someone would or wouldn’t give you the funding you seek.
Don’t confuse this with your self-belief, use track record as an indicator and remember there is a difference between confidence and arrogance.
A guaranteed ROI: Believe it or not, most investments are done so that people make their money back and more. Presenting the ROI quickly would be in your best interest, especially if you seeking an investment for cash flow issues.
If you guarantee an ROI, it is because you already have income/revenue and are at a shortfall. Perhaps some data about your situation might help or at least trigger interest by an investor.
Adding comments like my idea is worth a million dollars without having any data to back that up is simply a waste of time and money.
At the end of the day, stop emailing people saying “All I need is someone to believe in me.” Instead go believe in yourself and fucking do something first, before begging for money from others because you think you deserve a chance. No one deserves a chance, but everyone can earn one.
The real moronic part in all this is that the same people that beg for an investment are the ones making fun of those that beg on the streets, and yet all that passes through our minds at that time is: Why don’t they go do something instead.