Picture this: These 'beauty' tips make
your business look better to investors
By Jenny C. McCune • Bankrate.com

Behind every successful venture stands several private investors -- high net-worth individuals who are willing to finance a company in exchange for a high return.

While they're a crucial part of a company's financing strategy, getting them to take a second glance at you and your concept isn't easy. There are too many bad-looking investments for them to spend much time considering you.

But those who have been through the process say there are ways to make yourself more attractive to this discerning audience. Here are the private investor "beauty tips" they suggest:

Polish your verbal presentation.
You need to come up with an "elevator pitch" -- a sales presentation you can make in the time it takes an elevator to travel from the first to the 10th floor, says Stever Robbins of the Venture Coach.com Inc., a Cambridge, Mass.-based finance consulting firm.

The biggest mistake many budding business owners make is to blather on, giving lengthy and wandering speeches to would-be investors. Instead, find a way to summarize your business in just a few sentences. Intrigue, don't overwhelm.

Once you have the investor's attention, then you can launch into details, Robbins says.

Put together a top-rate management team.
Investors want to know that your company will be able to execute on your idea. They look for companies with well-rounded executives, says Mark Glennon, a partner with the law firm of Haleb & Coff in Chicago and president of the Illinois Venture Capital Conference. For example, if you're an engineer with a lot of technical know-how, but you possess no marketing experience, you'll need to hire a marketing VP who compensates for your weaknesses.

Use referrals to open doors.
Whenever possible, use your own network of contacts when looking for investors. Don Kendall, managing director of K2 Capital LLP, a private equity fund in Houston, has invested in companies and says he's more likely to return a call or an e-mail when the person seeking funds has been referred to him by someone he knows. "We're all so busy," he says. "I'm much more willing to return a call when someone I know and respect has referred the person."

Write a compelling business plan or executive summary.
Private investors hear so many business ideas they look for ways to discard them.

One weeding method is to toss any sloppy presentations, so you have to make sure yours is concise and hits the mark, K2's Kendall says. "No matter how good the people or the idea, if the presentation is sloppy it will make investors think twice," Kendall says. Besides the obvious "no typos" rule, be sure your written material:

• Explains your business idea.
• Gives the reasons the idea will succeed, including facts or figures to back up that assertion.
• Describes the competition your business will be facing
• Projects the rate of return the investor can expect.
• Assesses the pitfalls.

Ask yourself: Would I invest in this idea?
When writing your business plan or brainstorming convincing arguments for investors, try to put yourself in the mind of the private investor, advises Ray Vargo, assistant director of the Small Business Development Center at University of Pittsburgh's Katz Graduate School of Business.

Don't write a "book" on your company.
Kathy Morell, president of Make Us an Offer Inc., a New Jersey-based Internet startup, struck out many times before finding nine investors to chip in a total of $750,000. During her six-month search for capital, she learned the value of brevity. One of her eventual investors flat-out refused to look at business plans longer than five pages.

"You have to be succinct," she says. "Private investors get approached by so many people and they don't have the time to wade through a rambling business plan."

Put your money where you want your investors to put theirs.
If you're not willing to commit money to your venture, Morell asks, why should anyone else? She and her co-founder, her husband Michael, invested $40,000 of their own savings before looking for other investors. She also says that the New York New Media Association, an investment pool that the Morells made a presentation to, has turned down investment deals when a company founder fails to commit personal funds to the venture.

Practice your Q&A technique.
Learn how to field difficult questions and allay investors' fears before you meet with them, says Jay Bloom, chairman and CEO of Pet Assure Inc., a preferred provider health organization for pet owners based in Dover, N.J. It's similar to presidential candidates rehearsing before a big debate.

Practice by yourself, or if you can, have a knowledgeable friend toss you difficult questions. Your ability to expertly field questions will impress investors. Being speechless or saying, "I'll get back to you on that," will discourage people from thinking that your company is a worthy investment.

Sign up both private and institutional investors.
Investors often don't want to be the first to invest in a company, says Bloom. Motivate them to invest by getting some institutional investors on board. "Institutional investors are often a catalyst," Bloom says. "Individuals feel more safe about investing in a company that an institutional investor has placed money. They figure the institution's done its due diligence, so their investment is following smart money."

Understand the needs and motivation of investors.
Venture Coach Robbins suggests that entrepreneurs get a list of the other companies a potential backer has financed. Does your potential investor invest in "causes" and display a willingness to settle for a lower return? Or is a high return the investor's only goal?

In other words, don't limit presentations to outlining your company's investment needs, Robbins says -- be sure to ask investors what they're seeking from the deal. "An investor is just like a customer," Robbins says. "You need to understand them before you can sell them."

Be patient and persistent.
Bloom's Pet Assure has roughly 100 private investors, but the company has talked to several hundred investors to find them. "You're going to have a lot of false starts for every investor who actually pulls the trigger and invests," Bloom says. "It can be frustrating, but you can't let it get to you. You have to persevere in order to get the investment that your company needs."

Jenny C. McCune is a contributing editor based in Montana
To comment on this story, please e-mail the Bankrate.com editors

-- Posted: Jan. 10, 2000