I’ve been helping entrepreneurs raise capital for about ten years and have raised money for my own business three times. I also talk a lot to investors. I have learned that investors are looking for a lot more than a good financial return. Here is a list of some of the main things investors consider when trying to decide where to park their money:
- Trustworthy, high-integrity leadership – generally, investors feel a lot more comfortable investing when they sense that the entrepreneurs or fund managers they are entrusting their money with will be responsible stewards
- Reasonable level of risk – this is very much related to the first one – if investors trust an entrepreneur, they will perceive the risk of the investment to be lower; perceived risk may also be lower when the investor has a direct relationship with the business e.g. as a customer or supplier
- Transparency – many investors are frustrated with the complexity and opacity of Wall Street investing – they value being able to understand where there money is going and what it is being used for
- Being part of a community or tribe – when companies treat their investors as more than just a source of funding, but as a supportive, cohesive community, this can create a lot of investor value (I invested in a fund recently that actually provides zero financial return on investment, but gives me access to a community that I love)
- Being able to tell their friends and acquaintances about the cool thing they invested in – studies have shown that this is a big driver of investor decisions!
- Values alignment – a majority of investors state in surveys that it is important to them that their investments align with their values
- Cool perks – invitations to special VIP events, trips, discounts, sample boxes, etc. can add a lot of value for investors – I recently read an article about how much Estee Lauder’s shareholders love to be pampered and get goody bags at the annual shareholder meeting!
- Low to no fees – many investments involve middlemen and fees – opportunities to invest directly in a company allow investors to avoid those nasty fees