In­side the mind of an in­vestor

The Sunday Mail (Zimbabwe) - - ANALYSIS & OPINION - Tawanda Si­las Chi­tiyo is an en­tre­pre­neur, au­thor and founder of Zim­goldlink. Feed­back: tchi­tiyo@zim­goldlink.com and +263784323441 Tawanda Si­las Chi­tiyo

ZIM­BABWE is open for busi­ness and in­vestors are keen to come in. But, first, how do you win over any given in­vestor for your busi­ness? This is what I will an­swer. Money goes to peo­ple who know how to mul­ti­plyit. This is a com­mon truth in the busi­ness world. Fi­nan­cial cap­i­tal is drawn or at­tracted to ven­tures, busi­nesses or en­deav­ours where it can be mul­ti­plied.

In my line of work, which in­volves match­ing en­trepreneurs and busi­ness­peo­ple mostly in the nat­u­ral re­sources sec­tor to in­vestors, I come across many in­di­vid­u­als who seek in­vestors but do not fully un­der­stand this con­cept.

Ev­ery en­tre­pre­neur needs to un­der­stand that this is how in­vestors think. In­vestors are not look­ing for a place to park their money and keep it safe un­til such a time when they need it back. No! It goes be­yond you fend­ing for your fam­ily or be­ing pas­sion­ate about what you do.

In fact, the rea­son why most af­flu­ent in­di­vid­u­als de­cide to be­come in­vestors is be­cause they want their money to work for them. They want it to mul­ti­ply. In­vest­ing in fi­nan­cial in­stru­ments such as bonds is be­cause they want their money to mul­ti­ply through com­pound in­ter­est.

In­vest­ing in stocks is be­cause they want their money to mul­ti­ply as share prices in­crease and also earn good div­i­dends.

It’s all about mul­ti­ply­ing their money and mak­ing their money work for them.

It is no dif­fer­ent when it comes to them fi­nanc­ing or fund­ing your busi­ness. They want their money to mul­ti­ply.

Once you un­der­stand this as some­one who is in busi­ness, you make it eas­ier to po­si­tion your­self for in­vestors. I will give an ex­am­ple. Inaper­fect­world­with­out­the­p­os­si­bil­i­ty­oflos­ing money on any in­vest­ment you make, if you had $100 000 float­ing around and were look­ing for an op­por­tu­nity to grow your per­sonal money, would you put it in some­thing that would dou­ble your money in two years or in some­thing that would triple it in two years?

Of course, you would go for the op­tion where your money could triple in two years.

You would choose the op­tion with the high­est re­turns be­cause you would get back $300 000 in­stead of $200 000 af­ter two years.

Youwould­havere­ceivedare­turnon­in­vest­ment of 200 per­cent in two years.

There­fore, when you pitch to an in­vestor or ap­proach an in­vestor, you need to an­swer that ques­tion that is in their mind: “Will my money mul­ti­ply?”

You need to clar­ify at what rate their money will mul­ti­ply and in what time pe­riod, some­thing re­ferred to as re­turn on in­vest­ment (ROI).

It is, there­fore, im­por­tant for you as a busi­nessper­son­oren­trepreneur­to­think­in­termsofROI.

At what rate can I make an in­vestor’s money mul­ti­ply and over what pe­riod of time?

Quan­tify it.

Se­condly,ify­ouw­ere­to­be­give­na­choice­be­tween two al­ter­na­tives — to swim in wa­ter in­fested with sharks and get $200 000 or to run 10 kilo­me­tres and get $50 000 for your ef­forts, which would you choose?

Most peo­ple would choose run­ning the 10km despite it be­ing a lower sum of money re­ceived for your ef­forts.

Why? You could go for the big kill of $200 000, but if the sharks pounced on you, you would not live to see the $200 000.

In­stead, you would re­ward the sharks with a nice, easy meal be­cause of your greed.

WhatamIget­tin­gat?Thereis­risk­to­ev­ery­thing and in­vestors know this.

Your propo­si­tion or busi­ness may seem­ingly of­fer high re­turns to an in­vestor, but they will be ask­ing them­selves, “Am I not throw­ing my­self to the sharks?”

So, despite the lure of high re­turns and mul­ti­ply­ing their money, in­vestors are also look­ing at the risks as­so­ci­ated with re­ceiv­ing that high re­turn on their money. If the risk is too high, they may de­cide to move on and look for some­thing with more sen­si­ble risk.

In eval­u­at­ing this risk, they may ask them­selves ques­tion­ssuchas,“Isthis­per­son­com­pe­ten­te­nough to de­liver on what they are say­ing? Is their team strong enough? Does the mar­ket re­ally need what they are of­fer­ing and will it buy it? Will this boat not sink?”

This is the flurry of ques­tions an in­vestor will be ask­ingth­em­selvesintheirmin­dasy­ouare­mak­ing your pitch, ap­proach or propo­si­tion as an en­tre­pre­neur.

There­fore, it is im­por­tant to fully un­der­stand the risks as­so­ci­ated with your ven­ture and en­deav­our. Make the in­vestor see that you are aware of it. High­light the risks, in­di­cate your risk mit­i­ga­tion strate­giesand­mea­sure­sand­showthein­vestorthat you are equally com­mit­ted to en­sur­ing that they get their mul­ti­plied money back.

It is im­por­tant to al­ways think in terms of risk as an en­tre­pre­neur.

So­ques­tio­nis,“Arey­outry­ing­tothrowan­in­vestor to the sharks with your ven­ture?”

These are the ba­sics of how you need to be­gin to think as an en­tre­pre­neur to start win­ning with in­vestors. Think in terms or risk and re­turn.

There­are­manyother­fac­torsthatwillal­so­come into play such as value in­vest­ing, trust, like­abil­ity, im­pact in­vest­ing and in­vestors more con­cerned about causes, but the two fac­tors of risk and re­turn bear the foun­da­tion of win­ning over in­vestors.

There­fore, start train­ing your­self to think more like an in­vestor and you will find your­self win­ning over more in­vestors.

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