Martin Zwilling | AlleyWatch
Entrepreneurs looking for investor funding often fail to realize that all money comes with strings attached.
For example, if you have watched the “Shark Tank” TV series, you probably noticed that the “sharks” always ask the entrepreneurs for their intended “use of funds.”
Those who respond with one of the wrong answers, such as “I want to pay myself a salary,” usually go home empty-handed.
You may think this question is just an artifact of good television, but let me assure you that in my experience as an angel investor, it is a standard “make or break” inquiry posed to every entrepreneur.
Here are some guidelines that will help you with the right answers, not only in closing your next investment, but in planning when and how much money to ask for:
1. Investors are most interested in helping you scale the business.
This means they normally only invest instartups with a working product that has already been sold to at least one customer for full price (beta tests, giveaways and best friends do not count).
They are willing to cover marketing, inventory and scaling, but not product development.