Deciding whether to look for someone to invest in your new product does not have to be daunting or overwhelming. As with anything, take the time to do your homework, and you will reap the benefits.
An inventor should keep in mind these five things when looking for capital investment:
- Minimize risk. All investments involve some degree of risk. However, if you can demonstrate to potential investors a stable financial performance, they will be more receptive to your proposal. Be transparent, and be able to demonstrate a proper debt-to-profit ratio.
- Emphasize the uniqueness of the product or service. Demonstrate that you have done your homework and you have substantial proof your product is needed in the marketplace. Do not present another ingenious idea; present the idea plus tremendous proof the idea will make it out of the idea stage and into the real world.
- Create a sound business and marketing plan. A sound plan will contain the following attributes:
- Business sections discuss the industry, your business structure, your particular product or service, and the plan for success.
- A marketplace section describes and analyzes potential customers; provide demographics, buying trends and other pertinent information. Describe how you will succeed against your competitors with unique positioning.
- A financial section contains your income and cash flow statement, financial report and other financial ratios, such as break-even analysis.
- Compatibility is key. As an entrepreneur, you’re looking for investors who are the right fit for your business, and investors are looking for businesses that fit their investment portfolio. The best way to determine whether your business is a good match for investors is to look at past investments. Compile research to locate investors that are near you geographically, historically invest within your industry, and typically invest at the same stage of development for your product or service.
- Credibility is vital. Investors want amazing ideas originated by trustworthy entrepreneurs. They’re looking for inspired ideas with a credible foundation ensuring the product’s longevity, that the invention will not be here today and gone tomorrow. Stir investors to believe in your product. More important, believe in your business.