How do you create a business people want to invest in? We talked to Ira Hayes, VP of Strategic Development at IdeaPros, about four things you need to do to build a business that attracts investors. Don’t be a wantrepreneur! Read on to become a true entrepreneur!
1. Business Entity
As a new entrepreneur, you want to move your idea forward, and to do that, you need money. An entrepreneur takes a financial risk to create future value. Before you ask anyone for funding, you need to establish an investment vehicle and something to invest in. You want to set up a proper structure and a proper plan. Usually, it is an LLC or another type of company that allows people to participate. You can find all legal requirements for your state online. LLC will get you an EIN – your tax identification number, social security number, and you can open bank accounts as a business entity. Your business will officially exist.
“Business is the eggshell around the yolk that is your idea. You want to hatch it, let it grow, and feed it money till it turns into a Pterodactyl.” – Ira Hayes
2. Operating Agreement
Most limited or limited liability companies come with an operating agreement. It is the structure in which the company operates. You state who is on your board of directors, who is your CEO, and how you operate. It is bylaws for your initial structure.
3. Capitalization Table
A capitalization table is a document where you state who owns what part of your company. This simple (Excel or Google) document is essential for funding. You start as the sole owner, but as you gain funding, you give up percentages of the ownership. It starts simple, but it gets more complicated as you continue bringing new investors, lowering people’s initial contributions, and getting operational capital. However you decide to get money for your business, investors will want to know if you have a company, an operating agreement, and a cap table of percentages. They will also want to know what is your relationship with other owners of the business.
“Cap table is a percentage of ownership, and is important in the long run.” – Ira Hayes
4. Intellectual Property Assignment
Often you will be required to do an IP document, an intellectual property assignment says the company owns that piece of intellectual property. Those can be patents in your name or anything else that creates value for the business. Once the business has ownership of the idea, it can start growing through the capital and becomes investible.
“When building a house, you need to pull all the permits, lay the foundation, and continue to build from it.” – Ira Hayes
These basic operational steps are crucial, as you don’t want to have barriers when people are ready to give you money. Once you have a business plan per se, a corporate structure to receive money, people to run it, and a product to sell, you become investible. You stop being a wantrepreneur and become an entrepreneur.
The “Idea Pros” at IdeaPros have the resources, experience, and tools to help you at this step or any step in the entrepreneurial journey.
We partner with entrepreneurs at any stage and who are ready to invest their ideas. Apply for an interview and let’s explore partnering together.