The Right Money – Worth Repeating

Posted by Tom Locke on September 8th, 2011 filed in Business

I am currently in the midst of assisting some clients in obtaining the appropriate financing to put their business plans in motion.  Our strategic planning sessions have led us to financial discussions on obtaining the “right money”.  This is extremely important for what is required is not simply a financial transaction – it is a marriage, a partnership of  like minds.

To that end, I think it is worth repeating a portion of a blog entry on the “right money” that I made two years ago:

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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