5 questions you should ask yourself before talking to an investor

04.08.2023, updated 14.04.2024, Flavio Canetti

You have just developed a revolutionary new product[1] but you lack the funds to finance its industrialization. A competitor undergoing restructuring wants to sell you its factory located near your home. You’re aiming for a big contract but you need a new production hall. You have just divorced, and your ex-wife wants to sell you her share in your restaurant. You want to change your business model but you’re short on cash.

Behind these five seemingly ordinary situations in your professional or personal life lies the same reality: you are about to talk to an investor!

But what is an investor? An investor is someone who believes in you and is willing to take a risk by advancing his own money to help you achieve your goals. This can range from your banker to a public investment bank, a private or public investment fund, an industrialist, or even a private individual. Of course, they do this with the expectation of a return on their investment, which can vary from a simple interest rate to an equity stake in your company.

A lot of money is available for private business development projects these days, even after the recent rise in interest rates. However, demand is also very high.

As a result, you have access to several investors, each of whom can choose from many applicants. This is why you must first identify the right investor profile and then differentiate yourself from the many competitors.

In other words, searching for an investor is a competition, or better yet, a hunt that you must "win"!

Now let’s move on …, but first, let’s ask ourselves the five essential questions!

1) How much should I absolutely secure?

Before you go hunting for investment, it is essential to know what you are seeking and why. Regardless of the need or issue, you must understand the price and what this amount corresponds to.

In the case of purchasing assets, such as a company or industrial equipment, have their value assessed by someone experienced, along with your management team. If you are undertaking a development, prototyping, or industrialization activity, find comparable cases or request offers from potential subcontractors, in addition to your own estimates of the resources and time required.

When the investment is intended to finance an activity in the medium or long term, also plan a detailed cash flow projection to accompany your work plan. Finally, whatever amounts you determine, add 10 to 20% as a buffer for potential risks. It will give you some flexibility in the funding negotiations.

Any investor knows that entrepreneurial activities involve risks. Do not hide these risks from them! On the contrary, show that you have identified them and have a plan to mitigate their effects. No one expects you to be perfect, but you must appear credible and competent.

How can you ensure this? It’s simple: put yourself in the investor's shoes and analyze your request critically. If you are prepared to follow through, you will have a good chance of succeeding in your search.

A final note: depending on the size and structure of your company, make sure to clearly distinguish your personal financial situation from that of the company.

2) What do I know about my potential investor(s)?

Think of the investor as your most important customer: you need to understand how he/she might react to your proposal by studying his/her profile and portfolio of past and current investments.

What are their main criteria for judging the seriousness of a project? How long have they held his/her investments? What is his/her relationship with your market or area of expertise? Does he/she rely on regular advisors? Does he/she want to play an active role in the company’s strategic or operational management?

Your meeting is not an exam, but a negotiation. Ask questions that will help you establish your credibility and refine your pitch. Put yourself in the right mindset: you are not “begging” for money but allowing the investor to fund a project he/she has always wanted to support.

3) How does my target market work?

Regardless of the investor's profile, you must convince them that you have mastered the details of how your target market operates. This is essential for finding your place in that market.

What do you know about purchasing motivations, major players and influencers, evaluation criteria, decision-making processes, preferences, regulations, legal, fiscal, and financial constraints? What has been your experience with previous projects or contracts? Do not hesitate to consult the many public or private organisations active in this field and those around you. Your credibility depends on it, as does the investor's willingness to support you.

4) What is my business plan?

You can’t escape it: when it comes to investors, a business plan is essential! Especially the first page, the "Executive Summary," which should convey the essentials of your message in 3 to 5 minutes.

Pay particular attention to highlighting your team, the numbers, and the explanations that make your figures credible. For financing a commercial development, emphasize sales forecasts. For investment in your production capacity, highlight operational savings and the new capabilities that will result. Your document must be succinct and focus on the key factors of your argument but be ready to answer any questions your potential investor might have.

5) What is my value proposition?

This is what will truly interest an investor: what makes your proposal exceptional? Whether it’s a business development project or an investment to strengthen your position or capabilities, you must demonstrate that you will make the best possible use of the money you ask for—not only for yourself but also for the investor.

You are playing on two levels simultaneously: the market and the investor. On the market side, you must demonstrate your ability to outperform your competitors. On the investor side, you must satisfy their motivations and criteria regarding return on investment. What advantages will they find, whether financial, regarding reputation, market share, or other factors?

And now … 

Adlatus Trois lacs & Jura 's advisors have extensive experience in operations involving investors and can support you in their preparation and assist you during their implementation.

Do not hesitate to contact us: www.adlatus-trois-lacs-jura.ch

[1] The term product can also represent a service or a solution here.