Unlike institutional creditors (banks in general), private investors have a different business culture, and of course, and different expectations of course. In fact, starting from the beliefs and reaching out to business practices by a foreign investor, they may differ materially from what a entrepreneur can have in plan or in mind.
Sometimes these differences may seem detrimental to the success of a new business. Because investors risk relatively large amounts of capital, they can impose their own strategies in a company’s life.
Even if it can sometimes be extraordinary to have an investor with you, entrepreneurs need to understand the long-term “roadmap” associated with investing in their business.
The role of InvestMarket in the relationship between domestic entrepreneurs and foreign investors is to ensure a good interface of communication and bilateral engagement, articulated in six points or otherwise “perspectives”, before signing the “roadmap” and obtaining the necessary capital from investors. For a better understanding, we outline these perspectives below:
The value of an investor involved in launching a business proposed by an entrepreneur
In addition to the value of the capital raised as part of the investment, most investors want an active role in the company they finance. Therefore, entrepreneurs should expect to be led and even mentored by their investors. An investor in a key position in the company he’s funded is a good guarantee of success. On the other hand, a less involved investor in the company’s management may at some point require a new strategy orientation or another type of management or business practice. Directly non-direct investors can delegate the active role or request management audit of the funded company.
Context and personal perspective
Every experienced investor in a field or industry will be led into the decisions he will take from his earlier personal experiences. These experiences and consequently the decisions they make may vary from one investor to another. In addition, they may have less or greater experience, have more or less information about the business or industry that is involved. Regardless of the situation, it is important for entrepreneurs to fully understand that, in the end, experience with personality, courage and intuition are factors that can make a decisive contribution to the success of a business.
Entrepreneurs have some expectations as to how to launch and run a business. Often an investor based on past experience (often failures teaches you more than success) can perceive an entrepreneur’s standards as being naïve, and may disagree with the direction or the way in which company is leading. Both the entrepreneur and the investor have to go a relatively difficult road, but which, at the end, can lead to a better understanding and confidence in the company’s management.
Risk of investment and investor’s patience
When an investor focuses on investing in a company or when its investments are in a small number of risk-factoring companies (putting eggs in a single basket), the failure of one of the companies will also have an impact on others, so that he can react differently. If he has invested in several low-risk companies, he can accept the loss caused by a company’s failure. Some investors may react illogically, lose patience, or want to make detailed micro-management and “bang” in everything. But entrepreneurs can also be wrongly advised, can make mistakes, or have a wrong strategy. As a result of the situation and the fact that everyone has a distinct personality, the way they react will be different.
Professional management of the company
Unlike the classical, conservative and unproductive method of discussing with clients only at the counter, which banks still have unfortunately, investors tend to communicate with entrepreneurs on a much more informal and personal level. Often, such an approach can also lead to the opposite of expectations, as many entrepreneurs do not have a relaxed and transparent approach. Some of the investors have prepared strategies for addressing particular situations within a company, and can change the informal register to an extremely formal one.
Ethics is extremely important in any business. An entrepreneur must have a clear ethical behavior in all business concerns, since the process of setting up and developing a business is similar to having a partner in the firm and not an investor thinking only of profit. Therefore, an entrepreneurs who wants to be funded in launching or developing his business must also look at an investor well, not to be, or turn into a “Dark Angel.” A survey of previous affairs in the investor’s portfolio is sufficient to obtain the necessary references.
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