Many entrepreneurs, finding no understanding and investment in their own countries, rush to "conquer America." Of course, there are far more investment opportunities and investors in the U.S. than in most countries combined...
But try not to deceive yourself. Investors in the U.S. do not simply hand out money to anyone who wants it. I would even say that the competition for American investments is significantly higher than in any other country.
But remember – the most timid creature on the planet is the investor! An investor can be scared off and back out of a deal with you at any moment for a myriad of reasons you may not even consider.
This article is a brief guide on how to prepare for a meeting with investors.
Therefore, we will now explain to you a series of rules that you must adhere to in order to increase your chances of obtaining investment and protect yourself from potential problems in the future with minority investors.
- You must have an American company. Whether you want it or not. The chances that an American investor will give their money to a Kazakhstani or Ukrainian company are close to zero. There are three reasons for this.
— The first — is in the protection of investments. American laws protect the investments of American investors much better than the legislation of any other country.
— The second — is geographical. Your investor is not going to fly halfway across the world to find you. Investment business is a local business. So, investors want businesses to live, work, and develop nearby, not 10,000 kilometers away... An investor wants to control how you spend their money and what you do with it (the process).
— The third — is proximity to the market the company is targeting. An American investor is only interested in successes in the American market. Even if you can have phenomenal success in the markets of Ukraine, Thailand, or Laos, American investors are simply not concerned. Half of them have never even heard of such countries, and almost 100% won't even be able to find them on a map...
So your final product must be aimed at the American market.
Unfortunately, there are no alternatives. You must have an American company, and you or your partners must be its owners.
- Under no circumstances agree to open a company (even for free!!!) in the state of Delaware. This may surprise you. But just read this warning carefully. In 2004, the state of Delaware introduced high state income taxes (8.5%) and lost its status as a tax-free state and the most business-friendly state. After that, the state had to take action to stop the mass outflow of clients to other states. Therefore, Delaware enacted quite interesting specialized legislation that sharply differs from the legislation of other states.
In short, the legislation of the state of Delaware states that the "investor" or shareholder is always right. Even if they are the most minority shareholder. In any conflict between the company's management and shareholders, the laws of Delaware always side with the shareholders. Any minority shareholder can demand the removal of the company's management, and this will be implemented by the court in very short order. A court's decision on a small shareholder's claim takes effect immediately. Appeals can take months or years.
This is why most investors prefer that you are registered in Delaware. But for you, this is largely suicidal. Since the only thing you can rely on is the integrity of your investors. And if an investor is not very honest, then you won’t have a company...
- If you do not have a website, you do not exist. You must create a website (in English, of course) with a description of your company and your product. If there is no website and product, then there is simply nothing to talk to investors about...
We understand that often there is a situation where there is no actual product. There is an idea. But in this case, the team and your understanding of the market are important. That is, if you can prove to the investor that you have a strong team and a good understanding of the market and what the market currently needs, what clients are willing to pay for – then you can secure funding even without an actual product. Investors invest in teams, not ideas.
- When you go to a client, you must have a business card that includes your company name, website, American phone numbers, address, your email on your corporate domain (any free emails like yahoo.com or Yandex.ru are a clear signal for the investor to toss your card into the nearest trash can), and possibly your corporate social media pages.
- Presentation. Or the so-called Pitch. There are dozens of guides on how to do a Pitch. This is a small presentation of 10 – 12 pages about your company. You have two minutes to briefly and quickly convince the investor that you:
— understand the market and your place in it;
— have a good product with potentially high capitalization;
— have a good team and all the opportunities to enter the market.
Do not overload your presentation with numbers and text. You will provide that later in the business plan. Your task is to generate interest in the investor. Therefore, work on a beautiful and eye-catching design. The presentation of information is very important. You should not mumble under your breath while just reading the text from the presentation. The presentation is an illustration of your speech, not a cheat sheet...
A poor speech will kill the most brilliant idea. If you speak poorly (either generally or in English), engage your partner or a consultant who speaks well. A bright, passionate speech is 90% of success. Only those who can "infect" the investor with their idea and business will get the money.
- Business plan. Suppose you have succeeded. The meeting with the investor went excellently, and they liked the presentation and are ready to fund you. The next logical question is – how much? How much money do you need and when will you pay it back? Remember: your investor is not a patron or your mother, who can give you money just like that without any return. An investor is a tough businessman who will give nothing without understanding their benefit and how you will pay back the money. Here you must be ready. Ready to immediately name the required amount (or options for phased financing) and provide a clear, understandable explanation of how you will not just pay back the investor’s money but also how the investor can profit from you. It’s either that or nothing. We have seen many examples where an investor wanted to invest money after the presentation but then backed out after reviewing the business plan. In short, without a good (and concise) business plan, there will be no money.
- Marketing plan. Often the marketing plan is part of the business plan. But having a separate marketing plan always has a very positive impact. A marketing plan shows the investor that you understand not only the needs of the market and how to create the product, but also how to sell it. Be sure to show it to professionals. If you do not demonstrate knowledge and understanding of this issue, you will definitely not get money. Without proper marketing, there will be no sales, and no repayment to the investor.
- Corporate social media pages. Both your personal and company pages. After the investor is satisfied with the presentation and liked the business plan, the next step between signing the contract and transferring money to your account is the so-called Due Diligence, that is, project expertise.
This part includes not only checking the market and your business plan but also checking you personally and your team. What if there is no information about you on the internet except for a note that you won a botany competition in the Arkhangelsk region in the 8th grade? Right, you need to create information that presents you in a positive light. The best options are personal and corporate LinkedIn pages. But other social networks won't hurt either. The investor will be most pleased by your other successful projects or that you previously worked in successful companies and were part of successful professional teams.
- And finally, the investor is ready. The issue of the contract. First – do not rely on the investor's lawyer. The investor's lawyer will do everything in favor of the investor. Find your own lawyer. We can recommend a good lawyer who will represent your interests. Consult with them about what type of contract you want to take money from the investor. You must be ready for the investor’s questions – how you will take the investment and what percentage of the company you are willing to give to the investor. The investor must immediately know and understand that you are knowledgeable about this. If you do not know or understand this, you will receive money on such burdensome terms that you will regret taking this money many times over...
That's about it. Please read this article several times. Ignoring or neglecting these rules will simply result in you getting nothing. And the answer to the question of why things turned out that way (or rather, did not turn out) lies in these 9 points.
We wish you success!
