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Q&A: Finding an investor

By on April 05 2006

Q: I am an entrepreneur, I have a great idea but no investors, what can I do?

Answered by Richard Hall, partner at Ernst & Young

This is one of the most common questions that entrepreneurs face. More than 95 per cent of start-up ideas are funded through friends and family. Here’s why.

All of us have everyday random ideas that we believe could make an interesting start-up but we rarely act on them. The reality is that most ideas do not have the potential to generate a significant enterprise value to make a professional investor happy. So you turn to cousin James who knows that you will not run away with his money.

Even in the rare cases when ideas can generate value, the effort, resources, and uncertainty attached with commercialising them is beyond most individuals.

Let us assume that a person comes to us with an idea. How do you evaluate it? Most investors would immediately turn to the background of the inventor or entrepreneur. If the inventor has prior industry or functional experience that will be valuable in commercialising the concept, then investors are more likely to receive the idea favourably.

This does not mean that people with no experience will not get good ideas, only that they will have a harder time raising the resources. How would one overcome this? The most viable solution is to team up with or hire someone with specific, credible, and relevant industry experience and the social relationships that can help access investor networks. Not only does this investors greater confidence in your idea but also reassures you that you can count on someone to help you make the right moves in setting up the company and in developing and selling your product.

The simple truth is this – investing in a start-up is about confidence in the individual entrepreneur. People are likely to invest in an idea if they know who you are and believe you can make it work. If you can’t prove this right away, create a team that can. Richard Hall is an Ernst & Young partner focusing on fast-growth, dynamic, middle market businesses. Richard leads a 3000-strong team located in offices throughout the UK who are committed to helping middle market businesses grow. Richard's role includes leading the middle market transaction advisory services team.

Richard Hall is an Ernst & Young partner focusing on fast-growth, dynamic, middle market businesses. Richard leads a 3000-strong team located in offices throughout the UK who are committed to helping middle market businesses grow. Richard's role includes leading the middle market transaction advisory services team.

Comments [6]

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Interesting links

Comment by at 12:10pm, 15 Mar 2007

Raising finance is always a difficult and challenging process. I have found watching programs like the dragons den very beneficial in terms of understanding the key criteria investors are looking for in your business and more importantly you as an individual. Venture capitalists aren’t just investing in your business but what you bring to the table as well!

Comment by barry hatton at 11:21am, 11 Sep 2007

hi there,im a private inventor unforchantly im unemployed i dont have eny funds to startup my venture establishing a new product invention that of a viable novel productivity,iv contacted the dragons-den entreprenures and have had only one replie from peter-joneses team stating there inandated with requests ext.iv been told bye the locall business-link that hteres no grants available in this arear wear im in residance,i tryed to contact business-finace-angles application fees & admin charges exist you name it iv tryed it,iv no money for advertising and if you can support in eny way idd be pleased for your response.

Comment by Stuart Fitton at 11:04am, 09 Apr 2008

It would probably help if he could type.

Comment by Jayesh Roy at 11:11pm, 10 Apr 2008

Online Pet Store Seeks Investors to fund £100,000 of Pet Products, with a guarantee of doubling your investment in 2 years. Our Barclays Bank will guarantee the investment, so you investors have nothing to lose. We have products that produce a 500% return on the investment, but we need some Cashflow help to secure our Success. Interested Parties may contact Jay Roy, OM Pet Supply Store on 01274 299150.

Comment by fergus dyer-smith at 7:50pm, 25 Jul 2008

Read bussinessangelblog.com to get info direct from the horses mouth on how to raise those early stage funds

Comment by barry hatton at 1:50pm, 07 Aug 2008

hi there, im searching for a business-partner unforchantly i dont have eny capital of my own and am willing to shaire the proceeds 50% interest for 50k invest, if you have a geniune desire for more info you can call me eny time on my mobile: 07593601099 or e.mail at:barryinventedwhat@rock.com

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