Yesterday I heard a woman explain to would-be investors that along with money she needed for setting up her location, buying initial inventory and other normal start-up spending she needed an extra amount for “my peace of mind.” She explained: “I need this money so that I don’t go crazy making payroll while I’m out building a business.”
Put yourself in the investors’ place for a minute, and ask yourself: would you invest in this business? Would you invest your money to protect the entrepreneur’s peace of mind? I suppose I’m mean, but I wouldn’t. I’d invest my money in a business that was going to make money for me. I’d be okay with investing in technology, equipment, people, websites, and lots of other things, but not anybody’s peace of mind but my own.
This is a real case, the words were actually said, but I think there’s larger meaning. We as entrepreneurs often forget that investors invest to make money, not businesses. Way too often I hear entrepreneurs explain to investors how their business plan will guide them to creation of a healthy and happy business. That’s fine and good for the entrepreneurs, employees, and customers of that business, but the investors are trying to “invest,” meaning “make money,” and they don’t make money until the business sells out to another business or moves up and sells its stock to the public. A lot of healthy happy companies don’t make money for investors.
Investors aren’t bad people. They are doing their job, which is to invest wisely to make capital grow.