Understanding investment to help your future GROW

Printer-friendly versionSend to friend

"Plant a tree for your tomorrow"

- John Denver

Investors don't want to risk their money, they're willing to risk their money for the opportunity to gain a return. Media products are inherently risky. You need to assure any potential investor that you've done your homework, know what you're doing and have a shot at creating a profitable product.

I'm going to attempt an illustrative analogy to explain how investors evaluate entrepreneurs and their proposed businesses. Hopefully this will help your understanding of the fund raising process and the relationship you will want to have with a financing producer.

Money is useless by itself. Money is a symbol, and nothing more. Like letters on a page, money's power lies in the meaning behind the symbol. Think of money as fertilizer. Investors are people with bags of fertilizer - and they want to lay their fertilizer near growing plants in the hope of getting some fruit when it matures. When the fruit is plucked, some is taken by the investor and converted into fertilizer for other plants - thust the business cycle continues.

Your job, as an entrepreneur, is to convince the guys with bags of fertilizer than your plant is in good shape and can grow. Many would-be entrepreneurs make the mistake of pitching their plants to investors too soon, when they don't actually have a plant, they just have seeds. An idea is a seed, scatter your seeds randomly and some of them might grow, but most won't. If you till the earth, place the seed in good soil at the right depth and nurture the plant until it's strong enough to maintain itself you can attract far more investors.

There are investors who seek good ideas and will invest "seed money" to help you till the foundation of your business. Other investors look for growing plants that haven't yet matured and will invest in strong buds that will yield fruit. But no investor is going to place their fertilizer with a brown stick hastily shoved amongst rocky soil. Mature investors can tell immediately if your plant is growing. They will inspect the plant for disease and test the soil for potential problems down the line. They are looking for healthy, strong, blue-ribbon type plants. Don't try to fool them with a dry twig.

Unfortunately, how much you care, how much you believe, isn't the basis of their investment. There are investors who place their fertilizer with people - but how much those people care is just part of the equation. They're looking for knowledge, experience and history. Second-best isn't good enough.

You have to do your homework. You have to learn. You need to know what makes good soil, the needs and care for the type of plant you are trying to grow. You need to prepare yourself so that when you come to investors you don't just throw your seeds at them, show them that you have the soil, you know where and when to plant, you know how long it takes to grow and a business rooted in YOU can grow.