Somebody Wants to be Your Private Money Investor. Now what?

All the ducks are lined up...you've presented your opportunity to a private investor, they've expressed interest - now what?

 

First of all, this is exciting stuff...so congratulations if you are at this point. Moving ahead from here, though, requires me to assume that you've already done the following:

 

      •     Properly qualified the investor - e.g. you've had them complete an

        investor questionnaire - so you know that they meet the litmus test of a good private investor (ready, willing, able to place minimum

        investment)

      •     Prepared a business plan - a good one, specific to your money raising goals

      •     Have your offering documents in place - securities laws compliance

 

If you're missing any of those components, moving forward from when a potential investor says yes it going to get bumpy. Serious. It's going to be like running off to a job interview without your resume or a list of references. Now, if you have all of your ducks in a row, how do you move forward after someone expresses interest in placing funds with you? First let me tell you that each time I have been in this situation it has been different. When you're working with individual private investors, accredited or non-accredited, their wants, needs and situation are different. Some are ready to 'go' right away - they are decisive and not into feet dragging. Others will want to work with their professionals (attorney, CPA, etc) to determine the best place to pull the funds from for the deal. The one thing you don't want to be at this point is impatient. Don't ever rush the investor along the process. Everybody moves at their own pace. You have your own pace (probably hectic sometimes) and other people have theirs. You shouldn't set up your business so that you need private funding like a gasp for oxygen. Private investors will sense this and it will make them leery.

 

Onward.

 

There is one thing I have discovered which will close the private money deal 9.9 times out of 10. If you use this thing you won't have to worry about private investor slipping off the hook and dropping back down into the depths of the sea. What is it?

 

A commitment form.

 

It's a document that outlines the investors commitment to their deal with you. Both of you sign it. It spells out the time frame for placing funds for the investment, the amount, the basic terms of the deal. If your investor signals that they are ready to move ahead, then you both sign a commitment form. Use this to tell the investor: "now, this is your deal, I won't let anybody else in on it" or something along those lines - applicable to your deal. You want to let them know that they are doing the right thing by investing with you. Validating this by giving some exclusivity always helps.

 

Since you've put the time and effort in to get a private investor, why blow it on the 2 yard line?