Having investors can help enhance a business’ offering, particularly early on a business’s life, but finding an investor is easier said than done. One franchisor with over 100 locations shares how he found the right investors for his business.
Whether a business has expansion plans through an innovative product or service, or just starting out, investors can help a business with additional cash flow. But tracking down investors can be difficult, especially if a business owner does not know where to begin.
Luke Baylis, SumoSalad CEO and co-founder, experienced that difficulty when he and his business partner first tried to start SumoSalad, relying on self-funding initially for their first five stores.
“It's not only difficult to get an investor, it's even harder to get the right investor,” Luke says.
“The fundamental thing with getting an investor is, it's less about the money and more about the alignment in the leadership team and the CEO as well as the founders; the purpose for the business and also the future direction of the business.
“Then also looking at what the investor brings to the table, it's not just about money; it's about mentoring, it's about coaching, it's about a much greater investment of intellectual property and resource.”
For Luke, the process of finding an investor first started with trying to find as many potential investors as possible by researching.
“You know, you've got to ask questions. You've got to go and speak to people who can recommend people. You've got to expand your network. It can take months to do that,” Luke says.
“If you're going out to look for capital, you do target the right types of people, and well-research in who you do target. And then it's a matter of trying to shortlist those people and bring them on the story of your brand, and all your businesses, and where you want to go.
“If you can find that alignment, you'll typically find that you've got two or three people that you feel very comfortable with, and any one of those two or three people might be a great fit and would bring different strategic benefits. So then, it's a matter of negotiating at that point and saying what's going to be the best commercial outcome.”
Luke recommends finding a way to network with others that business owners will feel the most comfortable, as they may find networking events not to work for them and prefer to have one-on-one conversations with potential investors instead.
After finding the right investor, Luke said bringing their assistance onboard was a lot like building a long-term relationship.
“It was a 12-month period. It wasn't a Tinder date; it was a slow get-to-know each other,” he adds.
Going in solely for the investor, according to Luke, is the wrong way to go about finding the right investor. Business owners should be going in to find a friend, “building a friendship, and a trusted friendship, before the investment”.