Three Things To Do Before Having Conversations With Investors, Part II

Jenny Kassan has helped her clients raise millions of dollars from values-aligned investors and raised over $1 million for her own businesses.

2 of a 3-part series by Jenny Kassan on getting investment ready

Too many entrepreneurs jump right into raising money before taking these three important steps.  This is the main reason for the horror stories you hear about entrepreneurs whose investors are making them miserable.  Do these three things BEFORE having any conversations with investors to save time and lots of potential future headaches. In the first installment, we covered goals, values and non-negotiables.

This week we’re talking about the second thing: Get clear on the exit strategy for your investors.

• Which of the following fits your goals best?
• I want my investors to make money when I sell the company in 5-7 years.  Before the sale, I will invest everything I have into making the company an attractive target for acquisition by a bigger company.
• I want my investors to make money when I sell the company in _____ years.  I will look for a values-aligned buyer or maybe sell the business to my employees.  My investors will have to be patient because this could take some time.
• I would be open to considering the sale of my business, but I don’t want to be pressured to sell it to the wrong buyer.  I would like my investors to get paid out of profits/cash flow on a regular basis so that they are not in such a rush to have me sell the company.
• I want my investors to get paid when I take the company public.
• I want my investors to get paid by selling their investment to someone else.
• I want my investors to stay with me forever and only exit if they really need their original investment back.
• I want my investors to get paid an amount over time that equals a certain multiple of their original investment and then exit once they’ve reached that multiple.

There is no right answer!  Choose what fits best for you and your highest vision for your business.  Then design your investment offering for the exit strategy you choose.

Go to Part III.

To learn more, check out Raise Capital on Your Own Terms.

Jenny Kassan has over two decades of experience as an attorney and advisor for mission-driven enterprises.  She has helped her clients raise millions of dollars from values-aligned investors and raised over $1 million for her own businesses.  Jenny is certified as a coach by the International Association of Women in Coaching. She is also the author of Raise Capital on Your Own Terms: How to Fund Your Business without Selling Your Soul.