A national survey, released last week by capital raising magazine Wholesale Investor, has highlighted the need for entrepreneurs to get their deals in front of a wide investor audience. The findings show that investors will evaluate 10 to 30 deals before deciding to invest in one.
The study is compiled from a registered database of 5,400 high net worth, wholesale, professional and international investors for the first quarter (January to March) of 2010. It advises that while this rate is better than the Venture Capital Industry (where investors will easily view in excess of 30 deals before making a decision), an entreprenuer seeking to raise capital from 50 investors would have to put forward their deal to hundreds, perhaps thousands, of possible investors.
However the survey revelaed that High Net Worth investors were apparently more optimistic, sophisticated, had more money and invested in a wide gamut of industries.
The key point from the report are as follows:
- The sectors that received the most funding from investors over the past 12 months are: Financial Services, Property, Internet/IT, Greentech and Mining.
- Sectors that investors are seeking to invest into right now: Greentech, Mining, Property, Internet Financial Services and Healthcare.
- Investors are currently seeking exposure to Private companies (68.4 percent) and Pre-IPO opportunities (55.8 percent).
- Private investors are selective — 64.2 percent of investors review between 10 and 30 opportunities before they invest in one — but not to the extent of Venture Capitals, who review more than 30 deals before investing into one (AVCAL 2009).
- Investors are highly active right now — 60 percent are currently invested into three or more investments.
- Investor confidence in the market is currently very high — 94.8 percent of investors believe now is a good time to invest; 23.2 percent believe now is the best market they have ever seen and are seeking investments right now.
- Funds continue to be deployed into investments — less than 21.2 percent have 50 percent or more of their funds in cash compared with 79 percent in May ’09.
- Entrepreneurs need to improve their skills and knowledge in the areas of valuations, financial projections, management expertise and exit.
- Investors are still mostly focused on making direct investments into ordinary equity.
- 48.4 percent of investors have a portfolio valued at between $500k and $10million
- 66.3 percent of investors have a net worth of over $1million; 25.3 percent are worth more than $5 Million