How to choose the right business investor and why it matters

As an entrepreneur, you need to know what kind of investor you’re looking for. It’s not just about finding a person with deep pockets to keep financing your company; it’s about finding someone who believes in your product almost as much as you do.

While monetary support is the main reason why many entrepreneurs seek investors, you should be looking for investors who can add more value to your business. Non-financial support and expertise are two qualities all entrepreneurs should be looking for in their investors.

Many investors are former entrepreneurs who want to give their peers a chance to scale their companies, while of course profiting as well. The advice such investors can offer to the business is invaluable as they most likely faced similar challenges when they began their business.

Here are some tips that could help when you’re going through your list of potential investors for your company.

 
It’s a relationship

Choosing an investor is a lot like finding a co-founder or a partner. I wouldn’t start a company with someone I didn’t want to work with or someone that makes me cringe every time they walk into the room. There will be times when you don’t agree with each other’s ideas, but you both need to be able to compromise and look at the big picture for your company.

Don’t sweat the small stuff. If you are constantly arguing with your investor over the “small” things, they won’t want to back you when it really counts. So try to find an investor who you get along with and believe in your vision because this is what will maintain your partnership.

 
Knowledge is power

Don’t be afraid to ask your potential investor multiple questions around your industry. This is simply the best way to test how much they actually know about your space, your target market, your competitors and government policies that could affect your business, the list is endless.

In order for your investor to understand the direction of your company, it is important for them to understand your industry. It is crucial to, know the ins and outs of what your market space is and an understanding from investors is a clear sign that person is really interested in taking part in your business.

 
Who do they know?

Bringing in an investor with a big Rolodex could be golden for your business! The best investors have an extensive list of valuable contacts and resources that can help you open even more doors to other opportunities. However, beware of potential investors who don’t want to introduce you to any of their useful peers!

In the end, don’t be afraid to turn away an investor who isn’t right for you, even if they come with deep pockets. If you feel that partnering with certain investors won’t be a good fit for you, then simply walk away. Otherwise, you may end up with a pile of legal fees trying to get out of the relationship.

This article was originally published on StartupSmart.