09.07.2009 14:23:35

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Small business investment can be an attractive option for both investors and entrepreneurs.

Some small business investors offer the advantage of being more active in investments and will give advice and support as the company grows.  It is advisable for a person seeking Small Business investments to seek out Investors networks, because it is more often easier to get investments when you present to a group.  Plus, by getting a variety of investors, it will also open you up to more minds that can provide advice and assistance.

The reasons why many wealthy people want to become Small Business investors vary considerably. Some people seek a means to employ themselves, while others want to create jobs for their families and their future generations. Some really enjoy helping other start-ups succeed, while others simply have a hedonistic approach to investment, taking pleasure in risk-taking in a company’s success. In addition, there are those who are only interested on the economic gain and rate of return on an investment. Regardless of the reason, many Small Businesss share a few things in common:

1. Their average investment is anywhere between R40K to R700K,
2. They tend to invest in smaller amounts (ideal for early-stage development) in a number of deals so that they can have a diversified portfolio,
3. Even though profitability is their primary incentive, Small Business investors have local investments that promote community development and job growth.

To become an Small Business investor takes more than just personal wealth for a desired investment. According to Howard H. Stevenson, Sarofirm-Rock Professor of Business Administration at Harvard Business School, “reading business plans, studying in business school at Small Business seminars, and learning an industry by working in it” are ways that “one can develop expertise that will promote success in investing.” For both the entrepreneur and Small Business investor, Stevenson claims that “there is nothing like doing it,” referring to working and having experience in a given field.

In addition to having experience, Small Business investors should also define their personal and financial goals, and invest with those who have a solid track record when assessing any potential business opportunities.

1. Personal and financial goals- Small Business investors must share the same goals as the entrepreneur in order to avoid some unpleasant, long-term surprises. These include everything from overall company prospective, strategic sales, salary distribution, exit strategies, etc. It is crucial to identify and see eye-to-eye with all of the underlying goals of the entrepreneur before making any financial commitment.
 
2. Experience- Many Small Business investors were once entrepreneurs, and according to Lon McGowan, founder and CEO of iClick, “have been involved in many successful companies of their own.” Therefore, they not only have the financial means to invest in young companies, but they also have valuable industry and marketing experience to support other young, hopeful companies, making them excellent advisors and mentors.

3. Capability- The most successful investments were made by entrepreneurs with triumphant experiences; therefore, an investor’s track record is the single greatest component that may be indicative of one’s overall potential.

From an entrepreneurial perspective, attracting a small business investor with experience to work with you can hold huge advantages to your business. The support will not only come in the firm of finance, but often more importantly, investors will also bring experience, contacts and expertise to the business. This far outstrips any relationship you may have with your bank, no matter what your idea may be.

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Small business investment