Research That The Company Has Intelligent Management

Does the CEO sound like he sits on his butt all day and does nothing but collect the interest? Is management in it to make a quick buck for themselves, at your expense? Find out about the people running the business. Make sure that they actually care about filling the need as previously mentioned. Just remember, if the business isn’t filling the need, it’ll disappear; never to be heard from again.

Make Sure The Company Is Unique

The business should be hard to replicate.  If it ends up making a lot of money and it’s easy to duplicate, pretty soon, there will be thousands of businesses just like it!   This is where the branding of the company and quality of the product becomes of paramount importance.  If people trust the company, and the product is working just fine for them, it’ll be very difficult to get them to switch.

Evaluate If The Product/Service Is Underpriced

It makes sense that we want to make money, and thus, we’re looking for something inexpensive. Now, that doesn’t mean we’re ripping the other people off.  It’s inexpensive for a specific reason.  If it’s a private business, the owner may need money to expand, or if it’s public, people may perceive the company to be very risky or unsuccessful for whatever reason. In this case, by putting your money in, you’re actually giving it your vote of confidence and making it slightly more expensive.

Forget Buyer’s Remorse, you need to worry about Winner’s Remorse

It’s easy to make the winning bid when there are others at the table – Offer the highest price!  But as the pros will be the first to admit, the deals they walked away from were probably the deals they are most proud of.  So do your homework, arrive at a price range that makes sense given the risk and returns, and stay within that range.  It’s no different than buying stocks – find a good company, but buy it when the market has it on sale.

Don’t try to get your Piece of the Pie Bigger, Try to get the Whole Pie Bigger

Move past that simplistic model of low-balling and trying to eek out those last nickels and dimes from your “opponent”.  Look at the deal from the entrepreneur’s perspective and try to maximize both yours and the entrepreneur’s opportunity.  It will be better financially for both of you as you will be that much more willing to help each other in addition to uncovering new opportunities in the process.

Quantify the Complete Value of your Offer

Your offer is typically not just a number that you will be writing on a cheque.  Your offer typically includes all of your knowledge, experience, contacts, and advice.  The entrepreneur has quantified the opportunity in a Business Plan to demonstrate how much potential return there is for a certain level of risk.  You should do the same with your offer by quantifying how much additional revenue and profits can result in accepting your offer and hence partnering with someone of your stature.  This way ensures that your offer gets the proper attention it deserves.

When it comes time for a business to contemplate a venture capital investment, the questions often asked are: Where do I look?  How do I research?  And when I find something or someone, what do I do and how do I present my business in the very best light?  And the answer is to each of those questions is to look first at your own company and then decide whether it truly is a good candidate for an infusion of venture capital.

Unfair Advantage: A venture capital investor is taking an extraordinary risk on your firm. Make no mistake about that.  No matter how much due diligence or confidence of the innate ability you may present, the investor must now trust that you will work hard enough and long enough on a business that is solid enough to reward that risk with a large payback in a short time. What you must possess, above all else, is what investors often call an “unfair advantage” over your competitors.

A Scalable Business Model A bright idea may be very attractive, and even profitable.  But if it doesn’t have the potential to bring in more than a few million annually, venture capital investors won’t be interested.  They are looking for businesses that can scale up exponentially to reach beyond the typical regional or demographic niches that are characteristic of small and mid-sized companies.

The Bottom Line: If you’ve gone through this list and concluded that you’re a strong contender for VC funding, congratulations! You likely have a growing company with a strong valuation, a proven management team and the potential for an excellent upside return on initial investments. If you don’t go looking for VC funding before long, it’s likely that investors will come knocking on your door first.

Alternative investments are defined against the three traditional asset type-cash, stocks and bonds-and include an array of investment opportunities: Venture capital, hedge funds, derivatives, real estate, commodities, etc. High net worth individuals and institutions usually hold these investments, as they tend to be more illiquid than stock and bonds. With that said, returns on alternative investments have a low correlation with the performance of traditional asset classes, making them a potentially desirable investment for those who want to seek financial diversification.

The shifting attitude and perception of alternative investments-especially given the precarious state of the economy-is driven by a few factors. On the one hand, alternative investments are being used for portfolio diversification to the traditional asset classes. This sort of diversification is necessary to hedge against not only market volatility but decreasing consumer confidence, high personal debt, and of course, low interest rates.

The other issue affecting investments is high inflation. Individuals and institutions have traditionally invested in bonds-especially government bonds-to keep pace with inflation. Bonds were a safe way to grow your wealth while adopting a low risk financial profile. With higher interest rates, and backing from the government, bonds were an efficient way for entities like pension funds and insurance companies to grow the money they held. However, with low interest rates and high inflation-emerging globally-most bonds aren’t delivering the returns like they once had. And with consumer and market confidence still relatively weak, investing in equity is perceived as a risky option for most people.

While these issues make people apprehensive investing in public capital markets, they have made investing in alternative investments all that more attractive. This shift is supported by a number of recent observations: Increased involvement and growth by angel investors; reluctance of tech start-ups to go public; higher number of government pension funds investing in private equity; and recent figures coming out indicating private equity firms are sitting on a $1 trillion war chest.

Alternative investments can provide superior earnings for investors while mitigating risks from playing in the public stock market. Nevertheless, high barriers are still encountered for those trying to enter this market, with most private-equity firms requiring investors to have several million before they can invest-though some firms have recently begun to lower this number to $250,000 to attract more individuals.

Faced with these barriers, P2P Financial offers an easy and accessible service for accredited investors to directly invest in private companies and special situations. With the current state of the market, P2P offers high-quality investments that are extremely difficult to find for most investors. More importantly with low interest rates, high-inflation, and continued market volatility, it’s hard to gloss over alternative investments, as they may well become an important asset class in your investment portfolio.

If your background is in technology, do not invest in some new restaurant that is a block away from your home over a software company whose technology you know intimately but that is based on the other side of the country. What you will lose in plane tickets, long distance phone bills, or online meeting charges, you will most certainly gain through your expertise, guidance, and knowledge. If you are not familiar with a business’ industry or sector, no amount of proximity is going to help you decide if it is a money-maker or more importantly help that business leverage off of your experience once you have committed your capital.

What you bring to the table as an accredited investor is not just money, contacts, and your resume. Your bring all of the knowledge, experience, and exposure from within your industry. With that in mind, invest in businesses which you understand well and have been exposed to over the years. Knowing the key players and understanding the business model of a particular industry is more than half the battle.

The result is they spend a lot of time too early in their businesses lifecycle focused on serving VCs instead of serving their customers. Raising money is a negotiation. You need options when you are sitting at the bargaining table and you need a well defined path of producing business without capital, making this a legitimate path.

Only seek out capital investment when you have a product to present:  There are exceptions to every rule, but unless you have built a successful business before, or your business requires millions and millions of dollars to build up the product line don’t talk to VCs before you have a working product or prototype. The consequence is that VCs have no incentive to fund ideas. They can wait till later in the process of building a business. And it’s important that they do because they want to be sure of their decision to invest in YOU. The difference between VCs and entrepreneurs is customers: entrepreneurs have them, VCs do not Knowledge of your customer is what is going to make you

One of the biggest and most successful methods to attractive VC or PE or Angel Investors, (believe it or not) is your company blog.  By incorporating several of the ideas outlined below into the writing of your company blog, you can present the strengths of your business in a way that can outline leadership, innovation, and what you might expect from the future.  In doing so, you can communicate in a very effective way with potential investors no matter whom they are or where they may be located.  This is big. And because so many businesses do not fully employ blog writing, it’s to your advantage to stand out among the weaker old school competition.

Build a great pitch

Venture capitalists are busy people. If you want to sell them on your idea, you won’t have long to convince them: That’s why a blog identifying attributes of management and product innovation can be so important to you.  Find a good blog writer and allow your business to have a voice through the blog. Most VC pitches take less than an hour, and some meetings last just five minutes. In the short time allotted, you’ll need to show why your team is worthy, what your product or service is, the market you’re servicing and how your product varies from others in your field, and how much money you need and how you’ll use it.

Create a very smart introduction

Work your connections!  If you know a high-level lawyer or a startup CEO, press them for introductions to the venture capital firms they’ve worked with so you can request a short meeting. A warm referral will go a lot farther than a cold call.

If a VC wants to invest, read the term sheet carefully

If a VC firm is interested in your company, you should be prepared to spend months of meetings to hash out the details of your plan.  Once that is accomplished the next step is to present you with a term sheet outlining the business agreement. Even though you’re eager for the money, don’t be too quick to sign.  And be careful at this point so you don’t get in further than you desire.

Too many new entrepreneurs start off early in their pre-venture planning, by spending an inordinate amount of time and energy creating a formal business plan while being mistakenly convinced that it is the only way to finance the business. In reality, most small startups can get quite far in the startup race without ever involving professional investors.  The longer you can wait, the more you will have to offer and the better the eventual deal you can negotiate. In point of fact, you may never require professional investors at all.

There are of course instances in the early life of small businesses where outside investors are absolutely essential.  They can make the difference between your business even starting or not. It is an important thing to know when this is a necessity and not just the most convenient direction to go toward.

A first suggestion might be to try the methods of financing that include a variety of solid and smart alternatives.  However you must possess a smart business plan that is exclusive for investors. Unless it is obvious, try some of the other methods of financing first.

The first thing the entrepreneur needs to do is to write a business proposal.  The facts are that 80% of those who decided to start something fail in the end because no research was commenced or conducted. The proposal must have a clear idea as to direction of the business, how much will be needed as well as how long before the return on their vestment begins to be returned.

It is not all that difficult to find a venture capitalist. The real challenge is in creating a sellable plan for the idea.  There will also be other firms or individuals who will be sending a proposal to the same venture capital firm, who may have similar contents and capital desires.  Apart from creating the proposal, the entrepreneur will also have to explain this in person as to why this proposal should be accepted over the others in the pipeline.

2011 is setting in motion the beginning of a new Internet tech boom—quite different than what was witnessed in the late-90s. Whereas the previous boom focused on hardware and search engines, this boom centers on social media and mobile devices. Whereas the previous boom occurred in the San Francisco Bay area in Silicon Valley, this one has seen new players pop-up in Manhattan in an area referred to as Silicon Alley. What is already defining this boom from the last is the lack of companies rushing to go public. In fact, companies like Facebook are acting hostile towards Wall Street, and want to retain greater control of their company and avoid some of the market volatility from going public.

For Facebook and Twitter, the need to publicly raise money, just isn’t as pertinent as it once was. With Goldman Sachs recently investing $500 million into Facebook, for instance, there isn’t a rush for a Facebook IPO. But with that said, some see Goldman Sachs’ investment as a move to get on the inside track of underwriting Facebook’s IPO in a few years. These rumors are surfacing as Facebook is encroaching upon the 500 investor mark, which requires it to register with the SEC, making company information publicly available. The logic behind these rumors is that if they have to make information public, they might as well have the company go public.

For these tech companies, remaining private allows their founders to instill and hold on to the values and ideas that made their companies originally take-off. And with investors looking feverishly for great ideas and companies to park their money—given lingering post-recession volatility—what is going to motivate Facebook and Mark Zuckerberg to give up control and take on greater market instability?

Tapping into venture capitalists and angel investors, rather than raising money by going public, seems to signal a trend by start-ups in the post-recession economy. But even if other companies like Twitter, Foursquare, and Groupon flirt with the idea of going public, if Google’s path reflects anything, the general resolve seems to be wait an extended period of time—as what was witnessed with Google who went public very late in the game. And for Google, as seen with Facebook, this wait created a backlog of investors looking to own a stake in their company.

With this surge in private equity investing, as people become more cautious of the stock market, sites like P2P Financial are becoming essential, helping accredited investors invest privately in budding companies and entrepreneurs. As most individuals don’t have the luxury or capital to have their money managed by investment companies—aggressively pursuing the latest and hottest company and trend—connecting with privately held companies through P2P is more and more appearing to be an essential avenue to look to invest.

For those interested in investing in the next wave of Internet companies, privately investing and reaching out to them could be one of the most effective ways to be part of this market. And as such, P2P is a great avenue in which to enter this sector early in a business’ lifecycle.