Why Most Investors Invest In People, Not Ideas

Why Most Investors Invest In People, Not Ideas


The success of a business depends on its founders and management. Successful entrepreneurs can take a bad idea and make a good business out of it. And an unsuccessful entrepreneur can also take a good idea and create nothing out of it. If you expect an investor to put money in your business, you have to make a good pitch and establish a good case to convince him or her that your team is good enough to take that idea to market.

Investing in a startups comes with some amount of risks, some investors try to reduce their exposure to loss in so many ways, Just to be able to spread their wings wide. Risk of failure cannot be eliminated, but it can be reduced when identified and managed just like a reinsurance company that covers for an insurance company.

Every investor has his or her own rules that guides what type of industry to invest in, specific businesses that require huge sums of money and the amount of risk that can be taking when investing in those businesses. An inexperienced team would mean high risk for the investor hence the need to probe further to know how much domain knowledge you have about the industry you are venturing into. The people directly involved in the management of the business and the specific roles they will be playing in the business is equally important in the assessment. The onus always lies on the founders to convince beyond reasonable doubt that they are the right team to create a business out of the idea they are pitching.

The team may not be the sole reason why the investors you approach will bet on your business, but in the end they always ask if you can deliver what you have promised in your pitch. It takes a great team to build a company that lasts. Show me a great company and I will tell you the great team and leaders behind it. If an investor trusts you and your expertise for the business, he or she will trust you to have a workable plan for executing it.

Entrepreneurs with enough passion about what they intend to pursue have a higher chance of success and raising funds than those who may have just domain knowledge. Most entrepreneurs happen to solve their own problems and create a business out of that. When you create a business out of your own frustrations, you tend to attach yourself to the product and even use your own product. When that happens, you can better provide the best solution to that problem. And more often than not, a lot more people have the same problem. When an investor identifies that level of attachment and passion, it’s a plus to your quest for funding.

As a founder of a business, you also need to target investors that have some knowledge and experience in your market of choice to benefit from their knowledge and networks. Finally in as much as investors invest in people not ideas, your idea need not be ordinary, it has to stand out to get the attention of the investor before you get to impress him or her about why you deserve the funds.