The interests of an investor and an entrepreneur are always the same, right? Although they usually go hand in hand, you will probably also encounter times when there are opposing interests between entrepreneurs and investors. For example, in the start-up phase of a funding process. This need not be an obstacle, but it is good to be aware of it.
Suppose you have your own business. It is running well and you see plenty of opportunities in the market. You want to grow further, and to accelerate that you are looking for an external financier. An intensive process follows in which you convince potential investors of your future plans. Sure, critical and uncomfortable questions are sometimes asked, but all designed to assess and strengthen the robustness of your business plan. All noses are pointed in the same direction. Or are they not quite?
The pitch phase
An entrepreneur seeking an investor may still want to "polish" his proposition: the risks are obviously limited and there are only opportunities. The only way is up, and not investing would be a big mistake. Fortunately, investors know this game too. So they will critically review your projections. In doing so, they will also pay attention to the "air" in your budget. So caution is in order, because attracting an investor is also about mutual trust. By presenting things too rosy, you can overplay your hand and lose the trust of your financiers.
Negotiating terms with investors
Things get really exciting when an investor has expressed an intention to make an investment. What does this mean and what are the conditions for such a deal? As an entrepreneur, you naturally already have a lot of knowledge, including when it comes to contracts and associated terms and conditions. After all, you see them come up almost daily. But what about a funding contract? Pretty complicated, especially when you are issuing new shares. There are undoubtedly many provisions in such a shareholder agreement that will be new to you.
Opposing interests in the contract phase
Even in this part of the process, there may be conflicting interests between investors and entrepreneur. An investor is obviously looking for a good deal. Not only in terms of pricing, but also on the most favorable terms. And you obviously want to bring a good partner on board, but with a 'fair' deal. In short, both parties want to get the best out of the investment agreement. Being well prepared is therefore very important.
Sparring with an independent party
Depending on your knowledge and background and the type of investor, it is nice to be able to have a sounding board with an independent party. This can be an advisor, but also a befriended entrepreneur who has dealt with it before. Attracting an investor is not something you do every day, so being comfortable with the choices you make is very important.
How does NOM handle the interests of investor and entrepreneur?
NOM is involved as an investor in many fine northern Dutch SMEs. As a minority shareholder, we want to give the entrepreneur room to flourish. This includes openness and transparency, also about the various (sometimes conflicting) interests. In a funding process, we therefore take the entrepreneur extensively through the considerations and impact of certain choices. Of course, as investors, we will sometimes have a different preference or insight. We also ask critical questions. But always with the aim of coming to a joint conclusion and laying a good foundation for future success.
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Funding helps to get your business off to a fast start or to grow it further. But getting funding is not necessarily easy; there is a lot involved. For example, what kind of funding do you need? And what about equity?
Check out the funding options available from NOM