Understanding the Different Types of Investors

Most investors fall into at least one of three categories: emotional investors, who invest in you out of love or a relationship; strategic investors, who invest in the synergies offered by your business (based primarily on some nonfinancial objective, such as access to research and development, or a vendor-customer relationship— though financial return may still be a factor); and financial investors, whose primary or exclusive motivation is a return on capital and who invest in the financial rewards that your business plan (if properly executed) will produce. Your approach, plan, and deal terms may vary depending on the type of investor you’re dealing with, so it’s important for you to understand the investor and his or her objectives well in advance. Then your goal is to meet those objectives without compromising the long-term best interests of
your company and its current shareholders. Achieving that goal is challenging, but it can be easier than you might think if your team of advisers has extensive experience in meeting everyone’s objectives to get deals done properly and fairly. The more preparation,creativity, and pragmatism your team shows, the more likely that the deal will get done on a timely and affordable basis.