Introducing a business idea to investors and unravelling their wallets is one of the many challenges that you must face when breaking with your world-changing idea to the market. The good news is that investors are an interesting and easy-to-understand breed.
At least, that was the impression of the conversation with our long-term investor guru Yrjö Ojasaari. With his pleasant charm, he is like Mel Gibson in the film What Women Want. Instead of women, we looked into the world of investors.
Yrjö introduced us to the secret—the rational, logical thinking of investors when they make investment decisions. To avoid confusion, we are talking about investment funds, which must base their choices on rules, promises, and responsibilities to their investors. We are not looking into the thoughts of billionaires or business angels because they can allow themselves to be more emotional.
In time, the rules that investment funds follow when selecting companies and investments for their portfolio have been laid down:
- the fund must return a triple fee;
- the life of the fund is 10 years, of which the first 5 are intended for entry and the last 5 for exit;
- they aim for a 15% stake in companies;
- there are ca 20 companies in the portfolio.
4 important aspects of how to get the investor interested
In order to catch the investor’s interest in your idea, it is not necessary to bring him flowers or wear lipstick. The investor is interested in these four simple aspects:
1) the importance of the problem you are solving;
2) do you handle it significantly better than your competitors;
3) how easily the number of customers can be increased;
4) how big is the market you plan to capture.
But how do investors evaluate the teams? Not the ideas, but the people who are trying to make it happen?
Yrjö: “We prefer a team to an individual, because although he or she may be a very good specialist in a certain field, he or she may not be able to divide the skills into all-important areas. We prefer teams with previous cooperation experience to teams where group relationships are still developing. We prefer teams that already have previous successful experience in some projects. People’s competencies in their field are definitely important.”
Well, that’s how investors think. If you can apply your idea to the four points brought above, your business idea is sharp ready to step in front of investors. Be sure to watch Yrjö’s presentation, where he talked about the investment behind the scenes and also answered questions. As usual, that was the most exciting part.
