How to Draw Investors to Your Business
Black Enterprise magazine Fall 2019 issue

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Shawn Davis secured his venture capital after a private investor saw him on Shark Tank

Passion: Bring your product or service to life with your energy. In sizing up an entrepreneur, Corcoran looks at how much genuine enthusiasm the person has for the product. But John notes that fast talking should not be confused with passion. “Let investors see that you are doing what you love.” Cuban likes to home in on a unique quality about the company and the person running it: “I want to invest in both.” Also, adds Corcoran, “Does this person have the personality to sell the product and the endurance to weather insults and rejection?”

Knowledge: One of the biggest mistakes a business owner can make is “not knowing the company and its numbers inside out,” says Cuban. An investor will reject a business idea if the owner “is not prepared and is not realistic about their business or industry.” Be prepared to answer questions, advises Corcoran. For instance, what are your sales? Did you generate revenues? Have or will you turn a profit? What are the margins for your industry? John adds, “Investors want to see that all line items are being addressed, such as are you paying yourself a salary.”

Vision: Prove that there is market demand. Besides making a PowerPoint presentation, showing a prototype, or handing out product samples, provide results from research or knowledge you’ve acquired from surveys, focus groups, and product tests. An entrepreneur in residence at Babson College, John has M.B.A. students analyzing businesses in which he invests, including those from Shark Tank. The students assisted with EZ VIP’s expansion plans into Las Vegas, New York, and Los Angeles. They also provided feedback on the company’s website redesign, social media strategy, and marketing to women. Some helped with creating sales pitches for corporate partners, concierges, and general sponsors.

Sustainability: Demonstrate how you intend to grow the company. “How is the business scalable?” asks John. “EZ VIP was successful in one small area of the country that could be replicated in other areas, so there was scalability.” Investors gauge their return on investment based on a company’s potential to achieve high growth, strong market position, and sustainable competitive advantages. Also, investors don’t want to see that the management team is too thin or inexperienced to handle the company’s expansion. The key is to focus on leveraging your strengths and to reflect the strengths of the product, says Cuban.

Honesty: Don’t try to avoid or hide any problems with the company. Just be prepared to discuss how you plan to solve them. “Don’t tell me about sales and patents only for me to learn that the patents are pending, and when I look at the books I see that you have $400,000 in loans outstanding,” cautions John. Investors give money to entrepreneurs who appear trustworthy and transparent.

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