The Right Money

Posted by Tom Locke on September 1st, 2009 filed in Business

In my consulting practice I am often called upon to assist start ups in obtaining the appropriate financing to make their dreams a reality.  When this arises, I ask these entrepreneurial clients to focus their attention on obtaining the “right money”.  This is extremely important for what is required to put a business idea in motion is not simply a financial transaction – it is a marriage, a partnership of supposedly like minds.

When asked to define what qualifies as “right money”, I respond with “patient” and “passionate” capital.  Mark Payne (www.theredcase.com) also supports this stance and  has added “participatory” and  “proven” to come up with “The 4 P’s of an Ideal Investor”.  He then goes on to elaborate:

1. Patient – Understanding each other’s expectations is vital – you need to set out your best realistic estimate of time to market and revenue; claiming or agreeing to shorter timelines or unrealistic returns is short-sighted and setting yourself up for failure

2. Passionate – Empathy will make the road ahead far easier – if you can find people who feel passionately about your opportunity and its market, goals and potential is a real bonus.

3. Participatory – More than just a financial relationship – you are asking for investment but a good investor can offer so much more. Access to new markets, partners, skills and general support can be worth almost as much as the cash. As a side note, if you are paying directors’ fees or “management” charges as part of the investment package,  then they MUST contribute to the day to day activity and add value – apply the same rules to them as to ANY expenditure.

4. Proven – Ideally don’t be the first – in your market space or type of business. Research your potential investors; speak to other companies they work with – find out what they are really like to work with!

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