Education - Entrepreneurs - 3 - Attracting Investors to Your Business
ENTREPRENEURS Attracting Investors to Your Business WHAT INVESTORS LOOK FOR
LEVERAGING EUQITYEATS TO ATTRACT INVESTORS FULFILLING COMMITMENTS TO YOUR INVESTORS Investing in any business venture has inherent risks and benefits. At EquityEats, we help our entrepreneurs secure investors by looking at ways they can reduce the risks and increase the benefits of their potential offering. When we ask investors what motivates them to invest in an offering, they typically identify three driving factors:
• Potential Financial Rewards / Return on Investment
Investors make significant contributions to projects and often do so in order to reap the benefits of a profitable investment. The food & beverage industry often has a negative connotation for being a bad financial investment, but the truth is that while there are certainly many examples of bad restaurant investments, there are also plenty examples of restaurants that pay out considerable distributions to their investors.
• Perks of Being an Investor in a Restaurant
Going out to dinner is fun, and getting the VIP treatment makes it an even more enjoyable experience for many of our investors. Aside from enjoying the experience themselves, many investors find that it is a nice luxury to be able to share with their family, friends & coworkers.
• Helping to build your community and invest in the next generation
Restaurants often help to strengthen communities and many investors enjoy having the ability to help shape and improve the neighborhoods they work and live in. Many investors who are passionate about the food and beverage industry also take great pride in helping to invest in the next generation of talented chefs and entrepreneurs who are transforming and pushing the industry to its next level.
Leveraging EquityEats to Attract Investors to Your Business At EquityEats we are not successful unless both our investors and entrepreneurs are successful. With that in mind, we have taken great strides to ensure that our entrepreneurs can successfully attract investors. Our structure allows entrepreneurs the opportunity to address each of the factors that motivates investors, enabling them to successfully find a compelling arrangement for everyone:
• Financial Rewards
In an effort to acknowledge the significant contributions they make, investors receive preferred distributions until they have recouped the cost of their initial investment. EquityEats helps entrepreneurs set well-defined terms with investors allowing for financial transparency, clear lines of communication, consistent financial reporting and dependable distribution channels. Entrepreneurs can further their chances of attracting investors by diligently researching their financial projections to ensure they will be a financial success. Extensive market research as well as pre-existing plans for handling unexpected issues only furthers to help entrepreneurs prove their financial fortitude to potential investors.
• Perks to Encourage Continued Engagement
Perks are a key part of the EquityEats model. Giving an investor a little something on top of their equity stake has two main benefits: It incentivizes the investor to make the initial investment, and it encourages the investor to remain engaged in the business and frequent the establishment. Entrepreneurs are encouraged to come up with and decide upon the perks they would like to offer each investor (ranging from invites to the opening party, food credits, exclusive cooking classes and more), while EquityEats helps to ensure that the perks won’t negatively hinder the establishment from achieving its financial profitability (your financial projections should account for any perks you are offering investors).
• Support for Independent, Local Business to Build Community
At its core, EquityEats is inherently community-minded because our concepts are funded by members of the community coming together to help determine what they want to see in their neighborhoods. By contributing to a campaign, investors can feel like they are actively voting for the progress they would like to see, realized. Entrepreneurs can help increase their odds of being funded by making sure that their talent and passion for their concept shines through in their project page. Successful entrepreneurs will be able to get investors excited about their concepts and make them proud to be benefactors of something they admire.
Fulfilling Commitments to Your Investors What you offer to investors will act as an inducement for them to invest. Therefore, you must be in a position to deliver on and honor what you offer. Perks that will go to the bottom line of the business should be built into the financial projections and any VIP treatment (such as priority seating) should be achievable and manageable by your staff.
ENTREPRENEURS — Attracting Investors to Your Business
Additionally, as a prerequisite to raising money through EquityEats, you must agree to certain obligations to enhance the investment experience for investors.
• Give the majority of distributable cash flow to the EquityEats investors (via the EquityEats venture capital fund) until you have provided the EquityEats venture capital fund with distributions equal to the amount initially invested.
• Sell off such portion of your business that, based on your financial projections, will allow the EquityEats investors to receive a ~20% IRR (internal rate of return).
• Allow EquityEats to obtain financial data on the performance of the business so that updates can be provided to investors.
• Update investors regularly during the build-out of the location. Potential investors are motivated by a number of factors when deciding to invest. Your investment opportunity will be most successful if you can address a combination of these factors, but be careful not to over-promise, you must be able to deliver on everything that you offer. You have your concept developed, your financial projections calculated and an investment opportunity that is attractive to potential investors. You now need to get those investors! Read our next module to see how to run a successful fundraising campaign, reaching those all important engaged, local investors.
ENTREPRENEURS — Attracting Investors to Your Business
• Potential Financial Rewards / Return on Investment
Investors make significant contributions to projects and often do so in order to reap the benefits of a profitable investment. The food & beverage industry often has a negative connotation for being a bad financial investment, but the truth is that while there are certainly many examples of bad restaurant investments, there are also plenty examples of restaurants that pay out considerable distributions to their investors.
• Perks of Being an Investor in a Restaurant
Going out to dinner is fun, and getting the VIP treatment makes it an even more enjoyable experience for many of our investors. Aside from enjoying the experience themselves, many investors find that it is a nice luxury to be able to share with their family, friends & coworkers.
• Helping to build your community and invest in the next generation
Restaurants often help to strengthen communities and many investors enjoy having the ability to help shape and improve the neighborhoods they work and live in. Many investors who are passionate about the food and beverage industry also take great pride in helping to invest in the next generation of talented chefs and entrepreneurs who are transforming and pushing the industry to its next level.
Leveraging EquityEats to Attract Investors to Your Business At EquityEats we are not successful unless both our investors and entrepreneurs are successful. With that in mind, we have taken great strides to ensure that our entrepreneurs can successfully attract investors. Our structure allows entrepreneurs the opportunity to address each of the factors that motivates investors, enabling them to successfully find a compelling arrangement for everyone:
• Financial Rewards
In an effort to acknowledge the significant contributions they make, investors receive preferred distributions until they have recouped the cost of their initial investment. EquityEats helps entrepreneurs set well-defined terms with investors allowing for financial transparency, clear lines of communication, consistent financial reporting and dependable distribution channels. Entrepreneurs can further their chances of attracting investors by diligently researching their financial projections to ensure they will be a financial success. Extensive market research as well as pre-existing plans for handling unexpected issues only furthers to help entrepreneurs prove their financial fortitude to potential investors.
• Perks to Encourage Continued Engagement
Perks are a key part of the EquityEats model. Giving an investor a little something on top of their equity stake has two main benefits: It incentivizes the investor to make the initial investment, and it encourages the investor to remain engaged in the business and frequent the establishment. Entrepreneurs are encouraged to come up with and decide upon the perks they would like to offer each investor (ranging from invites to the opening party, food credits, exclusive cooking classes and more), while EquityEats helps to ensure that the perks won’t negatively hinder the establishment from achieving its financial profitability (your financial projections should account for any perks you are offering investors).
• Support for Independent, Local Business to Build Community
At its core, EquityEats is inherently community-minded because our concepts are funded by members of the community coming together to help determine what they want to see in their neighborhoods. By contributing to a campaign, investors can feel like they are actively voting for the progress they would like to see, realized. Entrepreneurs can help increase their odds of being funded by making sure that their talent and passion for their concept shines through in their project page. Successful entrepreneurs will be able to get investors excited about their concepts and make them proud to be benefactors of something they admire.
Fulfilling Commitments to Your Investors What you offer to investors will act as an inducement for them to invest. Therefore, you must be in a position to deliver on and honor what you offer. Perks that will go to the bottom line of the business should be built into the financial projections and any VIP treatment (such as priority seating) should be achievable and manageable by your staff.
ENTREPRENEURS — Attracting Investors to Your Business
Additionally, as a prerequisite to raising money through EquityEats, you must agree to certain obligations to enhance the investment experience for investors.
• Give the majority of distributable cash flow to the EquityEats investors (via the EquityEats venture capital fund) until you have provided the EquityEats venture capital fund with distributions equal to the amount initially invested.
• Sell off such portion of your business that, based on your financial projections, will allow the EquityEats investors to receive a ~20% IRR (internal rate of return).
• Allow EquityEats to obtain financial data on the performance of the business so that updates can be provided to investors.
• Update investors regularly during the build-out of the location. Potential investors are motivated by a number of factors when deciding to invest. Your investment opportunity will be most successful if you can address a combination of these factors, but be careful not to over-promise, you must be able to deliver on everything that you offer. You have your concept developed, your financial projections calculated and an investment opportunity that is attractive to potential investors. You now need to get those investors! Read our next module to see how to run a successful fundraising campaign, reaching those all important engaged, local investors.
ENTREPRENEURS — Attracting Investors to Your Business
