Categorizing Your Investors
"When raising money for your business, it makes good sense to categorize the types of private investors you're pitching...
Investing is about risk. The risk that you'll lose your money or not earn a decent return is the most obvious risk faced by private investors. But for most entrepreneurs, raising money is about managing emotional risk in addition to financial risk…
In the area of financial risk..., you need to determine the answers to these questions:
-Is the potential investor able to lose their investment in return for a chance for a significant upside? If so, their comfort with financial risk is high, and you can consider them savvy.
-Does their enthusiasm for you or your idea overshadow their investing experience? If so, their comfort with financial risk is low, and you should consider them supportive.
In the area of emotional risk...:
-Would the investor withhold their money if they thought it would damage a relationship? If so, their comfort level with emotional risk is low, so consider them worried.
-Are they far enough removed that the emotional risk feels low? If so, their comfort level with emotional risk is high, and you can consider them distant.
Using your responses to these questions, place your investor in the quadrant below that you think best fits their comfort level:
Savvy & Worried…
Savvy & Distant…
Supportive & Worried…
Supportive & Distant…”
Read the details in this article by Asheesh Advani in Entrepreneur.com.
