A business investor is in business for the same reasons as any other investor- to
make a lot of money. But the reasons that investors invest in different projects
is very varied.
Entrepreneurs need to analyze the different type of business investors
before they approach them with a business plan for financing.
In most projects, the entrepreneur is also the first business investor. Before entrepreneurs
approach angel investors and venture capitalists they tend to invest in the project
themselves. According to a business study, the individual and family can contribute
up to 42 per cent of the resources required for a business.
A
business investor is a person who invests in a business. The reason for the investment
may be a calculated financial risk or an emotional risk. Some times, a business
investor may decide to invest in a product or a firm because he or she supports
the cause behind the firm.
A
business investor is a person who is very well versed in the corporate world.
Most business investors have worked in large corporate organizations earlier and
have an understanding of the corporate world.
So, what makes a good business investor? Well, a good business investor needs to
be savvy as well as a certain bit cautious. The investor needs to assume some risk
in
financing new ideas and new concepts. But on the other hand, the investor should
not decide to finance a startup that is not properly researched and does not have
a solid business plan.
A good business investor also needs to formalize the investment like a business
transaction with legally binding documentation. Formal documentation and a repayment
plan are critical ingredients for reducing the emotional risks of transactions between
relatives and friends.
A business investor should also be able to tolerate both financial risk and emotional
risk. In addition, the investor needs to be supportive about the new business idea
as well as enthusiastic enough to encourage the new business owner and suggest changes
to the structure that may be appropriate.
A supportive and distant business investor will want to avoid financial risk but
can tolerate emotional risk. The investor needs to realize that some investments
and businesses may fail. He or she needs to be prepared for this.