#DSInvestor – What Are Investors Looking For?

Gail Chiasson, North American Editor

A good percentage of attendants at the Digital Investor Conference are there mainly because they are looking for money, so it was good to hear a number of digital investor types give ideas on what they are looking for from them, why, and even why they turn some down many presentations.

These investor types were also good for some pithy comments, so here’s a look at some of what we heard:

Edward Fitzelle, managing director, Whitestone Communications Inc., New York, asked entrepreneurs to know what their horizon is; how long they want to be in the business and what is their exit strategy.

“What are your exit plans and how will they mesh with a company looking for mergers and acquisitions?” he asked.

He said that you should have a template in your mind so that, when you are making decisions, they relate to that template. Know your strategy and what you want it to be, and how you are going to get market share.

“Further, keep that template ready so it will be on the radar screen.”

Sandra Andrews, vice-president, BMO Capital Markets, New York, said that mergers and acquisitions lately have been about buying small companies with problems, “but investors are looking to make investments in big, successful companies. They’re leery of operating losses.”

Andrews said that some of the things that attract investors to a company include: development; strong management; a good, unique business model; profitable or on the path to profitability; securing and renewing of long advertising contracts; spending wisely and meeting milestones; and having realistic valuation expectations.

Michael Butler, partner, NCT Ventures, Columbus, Ohio, said that a company waiting to improve its odds on getting venture capital, should read the VC company’s website, and, “Don’t send your plan if it doesn’t fit.”

He advised companies to try to identify someone who can offer your company a warm introduction, and get to know people in the company, even its attorneys.

Among criteria NCT looks for in companies are if they have a successful management team; and, if they do get money, for what they will use it.

Robert Nolan
, managing partner, Halyard Capital, New York, said that investors are mainly looking for the return on investment. Halyard looks for proof of profitability, scale, and attraction for national advertisers.

“And,” he said, “they need pricing integrity.”

While these previous four speakers comprised a panel, Bruce Falling, partner, Alerion Partners, Darien, Connecticut, had the podium to himself and was able to go into considerably more depth on the topic. Alerion, he said, always looks for the answers to three questions: What problem are you trying to solve? For whom? Why do they care?

“You must have proof points ie. prove your worth for an advertiser,” said Falling. While he gave examples of two good investment deals Alerion had made, he also told why another presentation for money had been turned down.

“We could see the company getting good, but couldn’t get past the revenue figures,”
he said.

Telling companies to try and enlarge their footprint, Falling said that you have to look at the size of the pond in which a company is swimming; the development it has had; whether it can prove value to investors; and whether it can “move the needle.”

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