Questions to ask before you invest in a company

Will this be your primary source of income or a supplement to your present income? Are there any complaints on file against the company with the Better Business Bureau or a local consumer protection agency? The Bottom Line. Financial Statements. Are there any complaints on file with the Washington Department of Financial Institutions? Here are nine questions for management that will have the CEO doing more than delivering the company line. One way to judge a company’s potential is the burn rate.

2. Do you have a specific industry or geographic focus for your investments?

Investor will have a number of questions about your startup and will want to know your story. But it is equally important that you understand the venture firm and the individual venture capitalist or angel investor who is considering an investment in your company. Pre-screening and developing a target list of qualified investors is part of the processbut you will also need to ask specific questions when selecting your investor group. Timing of when you ask questions is important. With prospective investors, you want to gage their interest in making an investment prior to peppering them with lots of questions about themselves and their funds. Here’s a lit of 10 questions you should try to answer prior to taking money from an investor.

Your Investment

An award-winning team of journalists, designers, and videographers who tell brand stories through Fast Company’s distinctive lens. Leaders who are shaping the future of business in creative ways. New workplaces, new food sources, new medicine—even an entirely new economic system. Jean Case recently wrote an article for entrepreneurs on the six questions to ask before you start a social enterprise. This one might seem obvious, but knowing exactly why you want to get involved will make sure you get the most out of it the right returns, the right impact—or both. Knowing your impact criteria matters hugely in choosing where to invest.

Your Knowledge and Skills

An award-winning team of journalists, designers, and videographers who tell brand stories through Fast Company’s distinctive lens. Leaders who are shaping the questions to ask before you invest in a company of business in creative ways. New workplaces, new food sources, new medicine—even an entirely new economic. Jean Case recently wrote an article for entrepreneurs on the six questions to ask before you start a social enterprise.

This one might seem obvious, but knowing exactly why you want to get involved will make sure you get the most out of it the right returns, the right impact—or. Knowing your impact criteria matters hugely in choosing where to invest. Some investors are agnostic: they want to create a better world through social and environmental change, and might want w meet entrepreneurs from education, housing, health, greentech and much. Others might know exactly the change they are looking for and want to focus on.

Even a single-minded commitment to one core social impact means making decisions about kinds of impact, beefore. Those are clearly women-supporting investments. But what about other businesses tackling challenges that may not have women at their core but certainly affect their lives?

Extremis, for example, provides safe, secure, pop-up shelters co,pany disaster zones and slums, allowing women to keep themselves and their families safe and it is run by a female entrepreneur, another way of supporting women through impact investing. Does investing in a business that improves lives in general—including for thousands of women, though it is not specifically focused on them—meet that impact criteria? Investors who want to make their first impact investments often ask us what kinds of returns they can expect.

Just as investors consider risk and return, they are now starting to consider impact. Sometimes queations will mean a high-risk, high-impact investment with a strong return profile. Sometimes it might mean a lower risk, high-impact investment with middling returns.

There are different ways to invest that will bring different returns, but knowing what you are looking for from the outset will help. If you know you are only looking for market-rate or market-beating returns, looking at hundreds of debt investments into slow-growth grassroots organizations might not be the right path for you. You might want to narrow your criteria to established businesses with strong track records across a range of sectors to maintain diversity. Of course, every investment is a risk.

Investments go down as well as up, and all investments should be discussed carefully with your financial questions to ask before you invest in a company. Often, the reason entrepreneurs look for angel capital is because of the value-add that they bring.

This is, if anything, more important for those considering themselves social entrepreneurs; they may be looking for impact expertise as well as business acumen in their investor. If you have networks in a particular industry, you might choose to invest largely in companies where those networks are x.

If you can offer an investee your time as a board member, or make introductions to other like-minded investors, you will be much more valuable to the entrepreneur and much better placed to help them scale. Perhaps you have experience in measuring impact and you can help them think of more efficient and useful ways to measure and report on outcomes. Even if you do not have the questiona to sit on their board, you might be able to share your valuable experience of marketing, or business growth, or product innovation as a more informal advisor.

The ibvest ambitious entrepreneurs should be able to choose which money they. Coming in with more than capital makes it clear you can add value to the business.

It is absolutely key to be clear on this before you make a commitment to invest. Entrepreneurs with a social mission are so diverse, and their understanding of—and willingness to report on—impact outcomes will be very different. If you are backing businesses like these from pure social impact motivation and the financial return is a nice upsideyou might be very clear that you want frequent, detailed outcome reports. This needs to form part of your initial discussion with the team. Whether you want to see medical-style, randomized control trials, or whether a yearly impact report alongside a financial report to shareholders will do it for you, you need to be clear with the investee company from the beginning, so both sides can manage their expectations.

Before you take the plunge into making your first impact investment, you might want to consider who you need to bring with you. You may want to consider if you want to impact invest with your partner, or if you would rather do it. So ahead of finding businesses in which to invest, you will need to find the people who can help.

Many people want to learn by doing, and joining an angel group will enable you to watch as fellow angels invest, learn from their experience, and co-invest alongside. Groups like these often offer training, introductory quedtions sessions and supported due diligence processes. Events Innovation Festival The Grill.

Follow us:. By Clare Jones 7 minute Read. Impact Impact 10 stories of world-changing innovation that went under the radar in Impact Big tech ruled the decade, We Work raised eyebrows in Impact The next decade will reshape how we think of technology accessibility. Design Co. Design The best and worst brand designs of the beofre Co.

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1. What is the status of your fund?

If the company isn’t growing and is losing cash, then you know what kind of performance to expect. Is this a new field of interest? Alternative Investments. Will you need financing? It is far more important to hear what the company plans to do to resolve the problem area s in both the short and long term. This question allows the manager to potentially touch on a variety of factors that could have an adverse impact on raw material or labor costs related to sourcing. Keep in mind that identifying problem areas are just one part of the equation. Will this be your primary source of income or a supplement to your present income?