Looking for funding? Local investors explain what it takes
By: Quincy Hodges, Reporter-May 9, 2016-neworleanscitybusiness.com
Whether you have a new business or an established company, providing the material that shows potential investors how they will get their money back is crucial.
As chief operating officer at ERG Enterprises in New Orleans, Barrett Cooper said he’s seen good projects and ideas, but when it comes to showing investors how they would get their return, the proposals have been lacking.
As an investor, Cooper said when meeting with potential clients, he’s looking for experience, someone who is hard-working and passionate.
While good personal traits of the founder or management team of a business is key, Cooper says the project itself must be something that is of value and makes sense on the product side.
ERG’s focus includes a lot of real estate and corporate investments, along with growing businesses and startup opportunities.
Cooper said real estate investment is a lot more standardized when it comes to financials because it’s based on assumptions of the market, usually of a five-year-window. When a business is involved in selling products or providing services, a lot more variables are involved, Cooper said.
When investing in a startup, Cooper said ERG looks at an opportunity and the potential of what the startup may become. Cooper said there are also hybrid opportunities where ERG looks at sales and revenue and how that can be turned into profit.
Cooper said ERG is spread out among investing into established, growing and startup investments, but currently they are more invested in real estate because of how positive the market is right now.
But good projects and businesses on paper may not be so good in reality, and can hurt the credibility of an entrepreneur. Cooper said it’s difficult for an entrepreneur to recover from that after asking for more money.
“It’s a challenge because the entrepreneur may not know what they’re doing,” Cooper said.
He encourages entrepreneurs to do their homework, network, speak with bankers and understand their pro forma.
Cooper said ERG looks for the best deals possible and does not have preferences as it relates to what type of business it invests in.
When structuring a proposal, Cooper said ERG likes to see the economics of the business, investment and distribution of the deal, a pro forma and operations of the business.
Paul Giffin, a partner with Jefferson Capital Partners in Mandeville, said his firm invests in established businesses that have positive cash flow. Giffin said one of the key components the firm looks for when is to make sure the owner has a quality management team charged with running the business, along with competitive advantages and a strategic niche.
As a general philosophy, Jefferson Capital Partners looks for diversification as an investment parameter so they have the ability to invest in various types of industries, Giffin said.
However, being located in this part of the country, Giffin said there’s a lot of investment in the energy sector. Currently, Giffin said his firm is seeing a lot of investment activity in health care, manufacturing and aerospace.
Giffin said when Jefferson Capital Partners meets with potential clients, it needs to see a business plan or presentation that is concise and focused, showing what their strengths and weaknesses are, along with strategic plans and an explanation of their current position in the market.