3 Ways Investors Assess Your Business (That Have Nothing to Do With Money)
An inside look at what potential investors want to see.
Why does an investor choose to invest in one business venture and pass on another?
For some investors, it can be an arduous process assessing a company’s potential and trying to determine which has that unique mix of ingredients that will ultimately end in a success story. And many times, that process focuses squarely on the numbers.
But for me, it’s all about the intangibles. Not the balance sheet. “Get rich quick” is not in my playbook. I’m not interested in a company with a manufactured idea. Do they make money? Sure. It may be lucrative, but for me, fast money isn’t tempting.
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I want to partner with companies that have real consumer draw and stories to tell; ones that are powerful and authentic and fueled by an unmistakable passion. I look for entrepreneurs that are in it for the long haul – whether they’ve been lovingly shepherding a decades-long family legacy or building something completely new for an industry they live and breathe. I keep my eye on products that emanate craft and quality; the sorts of thing that you need to hold in your hands, where you can feel the intention and painstaking care that went into it.
The most fruitful business ventures I’ve experienced throughout my career were the result of a methodology combining instinct and the intangibles. Those hard-to-define yet highly important qualities that can’t just be found in a pitch deck. Because it’s these qualities that make me want to invest so much more than dollars. These are the companies that will endure – whose stories and products are so revered by their customers that they will be able to continually rise and reinvent themselves as the world around them changes. And that’s a journey I want to be part of.
Here’s a look into three key qualities I consider when assessing a business venture and its ability to stand apart from the pack or the test of time:
While start-ups usually get all the love in the investment world, I see creative opportunity as being the universal equalizer across both emerging and established brands. And while every good brand has a leader, not everyone can say they have a creative entrepreneur at the helm – and that, to me, is a key differentiator. Creative entrepreneurs, at their core, embody a combination of original thinking and responsible risk-taking. I find it’s these people — with a palpable passion for pushing boundaries and creative problem solving — who can be the most interesting partners with some of the best potential to successfully bring a modern idea to the market.
They’re the hustlers. They have an invested gusto to stop at nothing and an “itch” to succeed that never gets scratched. These leaders embody an entrepreneurial spirit with interests and attributes outside of just being a “CEO.” Their passion fuels their creativity.
Their ability to foster a company culture built on creativity and original thinking will ultimately determine whether there’s the potential for innovation. And without innovation, there’s no business advantage. So, at the end of the day, the brands that I’m willing to take a risk on are the ones that are taking a risk on themselves and pursuing true creativity in all its forms.
2. Craft and quality
Some people might consider craft and quality to be the same thing. I’m not one of those people. But I do think craft and quality are inextricably linked. I’d argue that you can have a product that is high-quality (made with superior materials, etc.) – but that still does not embody craft. Craft is what you get when a creator is able to apply their learned skill consistently and at a high level, pouring their skill into something they are honored to share with you. And craft will always lead to quality output.
It’s that level of detail and passion — when companies think not only about quality but the craft behind what they sell or produce — that piques my interest as an investor. I am intrigued by the opportunity to tell the story of that skill, or the craftsperson behind a product, to help them grow and effectively share that craft with other like-minded enthusiasts.
In today’s fast-paced world, it’s not hard to discover quickly or cheaply made products that jump on the latest trend or fad. The list goes on and on. But consumers are smart. While they might humor those companies for a while, eventually, the fad will end or their tolerance for those sub-par products will too. While it might turn a quick buck for an investor, that’s not what I’m inspired by — I want to hitch my wagon to business ventures that live and breathe craft and quality. Companies that are proud to continually deliver on a high-standard and superior experience for their loyal followers.
We hear the word authentic a lot, right? It has for sure been overused in the marketing world. Every brand wants to say they are authentic. But a much smaller amount can actually demonstrate their authenticity. I want to work with a creative entrepreneur whose story and business idea are totally rooted in their personal story or the genuine problem they are trying to solve for a category they love.
I’m compelled by creative entrepreneurs who are self-aware, who acknowledge their passion yet are able to recognize where their expertise ends and begins and can see when something isn’t working, or they need to pivot or adapt. For a creative entrepreneur, the desire to grow stretches the limits of who you know yourself to be as a business owner. As vital as it is to "know your story," it’s equally as meaningful to embrace how that story can change over time.
I gravitate toward the entrepreneurs who have a front-row seat, living and breathing their product or service because that sort of authenticity has credibility that is far superior to someone trying to "manufacture" authenticity in a creative brainstorm. As an investor, these individuals are winsome because they peel back the curtain for us to come into their world. They understand the company’s fundamentals, challenges and objectives with a consistent message. I bet on their story because they’ve lived it.
Combining instinct and intangibles is good business
To me, you can’t put a price tag on the opportunity to be passionate about what you do, proud of the brand and company you’re building, and energized by creating truly meaningful connections with your audience. But at the end of the day, this isn’t just an investing playground. While I’m not in this solely for a financial return, I know that evaluating business ventures through these criteria is actually good business. The combination of these ingredients, with creativity at the core, will typically lead to superior performance metrics in the form of better performing, more-loved brands with more-loyal customers. Top-line sales is only one small piece of the performance pie when it comes to building brands that will endure over time.
If you’re willing to play the long game, to trust your gut and stay true to the principles most important to you, you’ll ultimately be rewarded. First, through the satisfaction and inspiration you’ll discover along the journey. And then, when the money follows.
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