Looking around for the right investment fit for your needs is like going out on dates and can be as important as a marriage in the long-term. So, how do you know when an investment really is “Mr. or Ms. Right”? There are a few things to look out for to help you determine if you’ve found a great fit.
You’ve got to have shared values and objectives
Feeling out your alignment with a potential entrepreneur on values and objectives is critical – you don’t want to discover a lack of synergy after it’s too late. Do you share the same general values with the entrepreneur whose startup you like? Do they believe in being open and forthcoming with their investors and customers? And are you aligned on the long-term goal of the business? If one of you wants to shoot for the stars while the other is expecting a conservative, lifestyle-type business, you may find yourself unhappy even if the company is successful.
Then there is je ne sais quoi
Just like in dating, the chemistry between you and the entrepreneurs needs to be there. This is perhaps the hardest element to find and you can, of course, live without it. But if the spark is there – the intangible “magic” that inspires you to work with and believe in this person – you are likely to have more fun supporting them in building a successful business. At such an early stage in their business, this is, arguably, one of the most important qualities to look for. Even if their business pivots or they stumble along the way, if you believe in them this intimately, you know they’ll work it out and build a successful business – if not this one, then another one.
It is a long-term investment
Ultimately, of course, the terms of any investment matter. You may believe in the entrepreneurs, their visions and plans, but this is a financial decision that you have to feel comfortable with over the long term. Valuation is always a matter of guesswork at a business’s earliest stages, but you need to feel that it is low enough – and therefore the upside is high enough – to compensate you for the risk you are taking.