Investors are well aware, that projects in early phases of development are burdened with a high degree of possible failure. Therefore, when they are to decide whether or not to engage in the project, they take into account a broader context of the situation, surrounding the whole project. If we were to analyze the conversations which take place between the originator and the investor, we could distinguish several crucial aspects, which are of high importance for the investor:
» internal strength and charisma.
This are things, which inspire confidence in the investor, and convince him, that the originator has causative power and the ability to fulfill the assumptions of his strategy. We must not confuse this with sales techniques, influencing or the NLP methodology. I am not sure to what degree can strength and charisma become learnt or acquired. Perhaps they partly result from the knowledge of the presented project and partly from personality traits… If you are interested in this topic, I can recommend Kurt Morgenstern’s book “The Laws of Charisma”.
» „the chemistry” and the pleasure of staying in each other’s company
Cooperating over a project always means spending time together – and not just for a moment, but in a longer time perspective. In this situation, both parties engaged in the project must feel comfortable, freely and, in a sense, appreciated. Therefore it is good to devote some time to get familiar with the investor (what is his way of thinking, what he does, what are his views, what he likes etc.) Instead of proceeding to rapidly to “settle” the case, first it is better to build a relationship, which is authentic and not pretended.
» knowledge of the language of business
The people who get along best are the ones, who speak the same language. In case of originators, most frequently they are the experts in the field of the presented project. They perfectly know the technologies, recipes and models, but on the other hand – they are not as well oriented in the financial documents, the legal formulas of companies or the instruments which serve to optimize taxes. And actually they do not have to be well oriented! Nevertheless, it is valuable for them to get familiar with the basic issues in order to understand the train of thought or the sequences of words spoken by the investor during a meeting. On the market it is possible to find good books, which explain the language of business in a simple way. A great example of such a book is “Financial Intelligence” by Karen Berman and Joe Knight.
» the awareness of the local and the global environment
A conversation looks completely different when we talk to a person, who sees, hears and feels what is going on around him or her and a person who is somehow “from the outside”. A person who is aware of the surrounding environment has a different way of combining facts, events, and of noticing the reasons for several situations. Such a person is comprehensively informed, he or she knows the local rhythm of life, he or she has seen a lot or has learned a lot. Such a person is able to look at him- or herself, at his or her project and at business from the point of view of a wider context and somehow feels the existing system of forces and relationships. Typically, this is the way investors act – they are aware and they have a wide view of the surrounding world.
» a good project, a business plan and a strategy
Subsequently, the investor gets familiar with the project. First, he or she usually takes a look at the investment teaser (which is a 3-5 page summary of the project), than he or she looks deeper, into the business plan (the marketing and the financial parts), analyzes the strategy, seeks to understand the project and to intuitively “feel” it. In the part of the negotiations, in which the originator is not the expert, the documents should be prepared by a specialist. Similarly, during the presentation of the project, the originator should use such vocabulary, which is understandable for the investor – especially when the investor is not particularly engaged with the project brand.
» strategic thinking and organization
While analyzing the documents as well as listening to the originator and the way he or she describes him- or herself, his or her project, his or her attitude towards business, people and the environment, the investor tries to find a strategic action and creates a picture of the project process. He or she wants to foresee, what will be the subsequent stages of the project development. He or she also wants to check, whether the author of the project – the originator – is prepared for unexpected events during the implementation of the project. It is valuable to clearly illustrate the whole process of the project.
» knowledge of the topic, the brand and the trends
The originator should demonstrate thorough knowledge of his or her project and all its surroundings. He or she should show the investor, that thanks to the possessed knowledge, experience and a specific sense of the project (proven by tangible events) he or she is able to create new reality. It Is very important to avoid situations, where the crucial information regarding the project are not presented to the investor immediately, but “will be mentioned later”, during further negotiations. Before having a meeting with the investor it is good to show the project presentation to a trusted person and to arrange a little simulation of that meeting. If there is a situation, where the author of the project does not know how to answer a question asked by the investor, the best solution is to admit the truth and to immediately ensure the investor that the lack of knowledge will be complemented right after the meeting.
» the engagement and the readiness for operational work
The investor must be sure, that once he or she enters the project, its originator is going to be completely devoted to the project operational work. The investor wants to have a partner by his or her side, who will be ready to undertake even hard and exhausting operational work, and whose motivation will not be the deterrent record in the investment agreement, but deep conviction of the possibility of achieving success. Investors really appreciate people, who are not afraid to work and – if necessary – are ready to leave a management position for a lower one for a while, if that is the requirement of the situation.
» flexibility and distance towards yourself ad towards the project
Sometimes originators commit a mistake. They think, that since they devoted so much time, engagement and financial resources to the project, they are the best in evaluating the project’s situation. Because of this they are not very flexible in the negotiations referring to the investor’s engagement in the project (e.g. the estimation of the company’s value, the shares or modifications in the project development strategy). In such a situation it is necessary to keep in mind, that only the synergy of both parties enables the project to start existing in the market. Even if the investor’s vision is a little different from the originator’s point of view. After all, the goal will be achieved when the project becomes commercialized and not if it just remains an interesting, but useless, curiosity.
» accuracy and impartiality
Sometimes it happens, that the originators pay too much attention to the strengths of their project. This may cause excessive optimism resulting from the project’s current development stage as well as from the initial interest of the investor and may lead to the underestimation of the risks, which is why the originators do not present the full picture of the situation and sometimes embellish it slightly. The investor is not interested in the propaganda of success. He or she only wants to receive an impartial description of the projects, even with its weak links.
On the other side there are the expectations the originators have in relation to the investors. The entrepreneurs’ competences in attracting investors and conducting investment negotiations after all evolve in time similarly as the market of the Angels of Business. At the beginning of the economical transformation in Poland, the awareness of the authors of projects was limited primarily to possessing expert knowledge, e.g. in the area of technology. Today originators are often able to independently reach out to the investors and prepare professional presentations of their projects. Therefore, in case of global projects with a high potential of development, their authors themselves constitute value, which is sought by the investors. Currently, not only the capital or the market specialization finally decide whether an originator of a project will start cooperating with an investor. A factor which is also important nowadays is the way the investor presents himself.
The entrepreneurs the apreciate:
» making realistic promises (not changing them during the negotiations and remaining credible)
» clearly defining the expectations (so that the entrepreneurs may know what to expect)
» concreteness and reliability (basing on facts and events)
On the market it is possible to find originators of projects, who do not understand why they cannot receive feedback from the investors, why their negotiations last such a horribly long time and the agreements they made change constantly, despite of the financial resources declared by the investor, his or her willingness to invest and the benevolence towards the project. Undoubtedly, such an atmosphere is not conductive to building trust.
At the end, if I were to add one more thing from the point of view of an observer of both – originators and investors – I would underline the following:
» the need to be reliable and timely (and thus show respect, our agency and having the situation under control)
» the necessity to loudly express our doubts and any unclear understanding of important issues (delaying this causes the formation of conjecture, which is not necessarily relevant to reality)