10 Things Investors Look for in a Deal

 

1) Management –  Investors invest in people not companies.

2) How well management understands business in general, operations, their industry, the competition, market share, etc.

3) Solid financial projections (no pie in the sky), it’s a direct reflection on the competency of the management team.

4) How the deal is structured which includes the capitalization structure, subsequent funding needs of the company and how it will affect dilution, etc.

5) Exit Strategy, what is it and when? Additional considerations will be private equity concerns which could result in lost of opportunity.

6) Skin in the game; how much actual cash do the owners have invested in the company?

a) How committed are they long term?

b) How much do they have to lose?

c) What’s going to keep them from walking if they get a better offer/job?

7) Salaries; exorbitant salaries are unacceptable especially in a start-up scenario.

8) Underestimated financial needs- A lack of adequate capital is the number 1 reason companies fail.

a) Prepare a Use of Proceeds; most investors will not invest without one.

9) Investor want to make sure all contracts, patents, technologies and proprietary information are in place and done right.

10) Professional money raisers, what’s that? These are companies that appear to always be raising money but never seem to execute their business plan.