Got a Great Business Concept: How To Get Investors

We are watching the sunset drinking a hot latte relaxing from a hard days work at business. As our mind drifts freely a thought for the next greatest invention or business idea starts spinning our brain like a car on a race track. For months we ponder over this idea and finally after figuring out every detail make a pitch for investors. A resounding “no” appears to come back from everyone we talk to. No one wants to help us and no one wants to invest their money. One of the reasons why “no” is often heard after pitching a new business idea is because few people have the ability to predict the future, the nerve to invest their money, or the personality to accept that someone else could be smarter. Many famous people ignored or rejected ideas that were considered before their time. Consider the following: “I think there is a world market for maybe five computers.” – Thomas Watson, chairman of IBM, 1943“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” – Western Union, internal memo, 1876“The concept is interesting and well-formed, but in order to earn better than a ‘C’, the idea must be feasible.” – A Yale University management professor in response to Fred Smith’s paper proposing reliable overnight delivery service. Smith went on to found FedEx.“Who the hell wants to hear actors talk?”– Harry Warner, Warner Brothers, 1927“We don’t like their sound, and guitar music is on its way out.” – Decca Recording Company, rejecting The Beatles, 1962“Heavier than air flying machines are impossible.”– Lord Kelvin, President, Royal Society, 1895“There is no reason anyone would want a computer in their home.” – Ken Olson, President, Chairman and Founder of Digital Equipment Corporation, 1977“If I had thought about it, I wouldn’t have done the experiment. The literature was full of examples that said you can’t do this.” – Spencer Silver, on the work that led to the unique adhesives on 3–M Post–It notepads “The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?” – David Sarnoff’s associates in response to his urgings for investment in the radio in the 1920’s“Everything that can be invented has been invented.” – Charles H. Duell, Commissioner, U.S. Patent Office, 1899“So we went to Atari and said, “Hey we’ve got this amazing thing, even built with some of your parts, what do you think about funding us? Or we’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.” And they said, “No”. So then we went to Hewlett Packard and they said, “Hey, we don’t need you; you haven’t even got through college yet.” – Apple Computer Co–Founder Steve Jobs on attempts to get Atari and HP interested in he and Steve Wozniak’s personal computer.“You want to have consistent an uniform muscle development across all of your muscles? It can’t be done. It’s just a fact of life. You have to accept inconsistent muscle development as an unalterable condition of weight training.” – Response to Arthur Jones, who solved the “unsolvable” problem by inventing Nautilus.“Airplanes are interesting toys, but are of no military value.”– Marechal Ferdinand Foch, Professor of strategy, Ecole Superieure de Guerre“Drill for oil? You mean drill into the ground to try to find oil? You’re crazy.” – Drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859“640k ought to be enough for anybody.”– Bill Gates, Co–Founder and CEO of Microsoft, 1981 The key to getting people to take risks on ideas and concepts that are not well known and have a substantial risk with them is to think from their perspective. Assuming that you are a wealthy business man with cash to invest would you spend your resources on a product that may never be of interest to consumers, will costs lots of money, has substantial risk, and with a person you don’t know well? The answer is a resounding “no”. However, by seeing the perspective of an investor you can understand and address each of their concerns. Typically these concerns revolve around your credibility, risk versus return, the initial investment amount, and that person’s risk aversion level. Credibility: How that person views you in terms of honesty, integrity, skills, personality, resource and connections. If they don’t believe you can do the job, don’t believe you are honest and don’t believe you know the right people they are unlikely to believe you are credible. However, if they believe you to be able to pull off a major project they will be receptive to your ideas. Risk versus Return: The higher the risk, the higher the return and visa versa. Showing investors how profitable a future business can become is important. For example, you are unlikely to get investors to start a new auto manufacturing plant that uses the same technology as other automakers in an environment where the U.S. auto industry is declining. Initial Investment Amount: Do you need $10,000 or $10,000,000? Don’t bother soliciting small business owners and middle class citizens for millions of dollars they don’t have. Generally the smaller the start-up cost the more likely someone is going to invest. It is important to show investors how quickly they can get this money back and start making a profit. Risk Aversion: Older investors are unlikely to give you their life savings because they are not motivated to take such risks. Understanding a person’s risk aversion tells you how much risk they are willing to accept for a particular return. Generally the higher the risk aversion the more they are willing to invest. Murad Ali is a three time book author, a Ph.D. candidate, and a human resource manager. http://www.thenewbusinessworld.blogspot.com