Who Are The Investors?

To raise money from investors, you need to know who they are, where to find them, and how to get them to participate in your project. This sounds straightforward, doesn't it?

And, if you could simply open up your local yellow pages to "Business Investors, Private Individuals", this would be an easy task. But you can't. Even if you could, the names listed would grossly misrepresent the true picture of who investors are and how they invest.

As an entrepreneur, the real secret to mastering the game of raising investment capital is to fully understand that investors are a highly diverse group.

There are more differences than similarities between a seasoned venture capitalist with years of investing experience and the typical "angel" (private investor) with $15,000 to invest and no experience. Because of these differences, you should target your investment program to the types of investors who are most likely to finance your project. Generally speaking, investors fall into the following categories:

1. Institutional Insiders
2. Superpros
3. Corporate Partners
4. Sophisticates
5. Patrons
6. Everyday Angels
7. The Unwashed Masses
8. Fool's Gold

1. Institutional Insiders are the career professionals who manage venture capital funds and major investment banks. These individuals network with international finance, accounting, and legal firms; they only do big deals in the millions of dollars. The communities in which these people operate are tightly knit and exclusive. All such investors have cadres of analysts and industry experts who surgically dissect every project before allowing the funds to participate. They typically review hundreds of deals and fund a handful, usually within one or two key industries.

2. Superpros are very wealthy, highly experienced individuals with the capability of personally providing hundreds of thousands, if not millions of dollars, in investment capital. To qualify as a Superpro, the person will have made his or her fortune through various business endeavors. They are often headstrong with big egos. However, if you win them over, they'll write you the check.

3. Corporate Partners are companies that invest in assets created by entrepreneurs. The assets could include proprietary technology, unique processes, skilled personnel, and others. Corporate Partners invest solely for the benefit of their company; thus, they are only interested in projects that intersect with their own business plans.

4. Sophisticates are individuals with a great deal of business and investment experience. They do not have as much investment capital as the Superpros, and will usually invest less than $250,000 per project (possibly more if they are actively involved in the company). Attorneys, corporate executives, financial analysts, and others make up the ranks of the sophisticates. They will usually submit a project to tremendous scrutiny prior to investing; their personal experiences have taught them to be cautious.

5. Patrons are individuals with money but little business experience. These could include celebrities, sports figures, people who win lotteries or gain inheritances, etc.  The better-established patrons always have professional advisors who review projects on their behalf; less sophisticated individuals may make their own decisions.

6. Everyday Angels are the "salt-of-the-earth" investors. These people have relatively little to invest (averaging between $5,000 - $50,000), but there are many more of them than all other kinds of investors combined. They are generally educated, with enough business experience to make them legally qualified as investors.

7. The Unwashed Masses are not named as such because of their bathing habits or any prejudice. They are simply the remaining populace lacking BOTH investment capital and businessinvestment experience. Due to a number of important factors, you should consider investors from this group as Untouchables, and STAY AWAY from them.

8. Fool's Gold is not actually a category of investor-- and that's the point. There are many individuals with various schemes to take the minimal funds that you may have available for your project. These people will convince you that they have investors for your project. They always want some kind of advance payment, sometimes a few hundred dollars, sometimes tens of thousands. They can be very persuasive, even arrogant. But, if you give them your money, you become the Fool.

Many of these categories overlap; for example, there are certainly individuals who combine some of the qualities of Sophisticates with Everyday Angels, and so forth. However, as an entrepreneur, you need to recognize that the work habits, social activities, and lifestyles of these groups are different from one another. If your investment campaign targets only Superpros, you will be involved in a completely different set of activities than if you want Everyday Angels. Of course, your campaign may target multiple categories of investors. You would then have separate strategies to locate and close each group. The key to a successful investment campaign is to research and target your most likely investors.

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Master Plan Strategies is a consulting group that manages investment and divestment programs. The firm offers assistance with all the steps necessary to complete an offering of securities, from project planning to consulting on an investor marketing program.