Convincing Investors

The major point to make to a potential funder is that by investing in my renewable energy project, they will make a profit. Renewable energy is the future, but I do believe that most people already know that. To convince an investor to put money into my project I need to show that my renewable project will make them money. To do this I need to have a complete business plan drawn up. The equipment that I need and the cost, projected number of employees, a marketing campaign to get my project known to the public and an estimated time period of return. I think another great thing to show would be that there are other investors willing to invest. By having more investors that gives each investor a little security that other people believe that the idea is profitable and they aren’t as much at risk.

 

Return on Equity is the best process to explain the potential for success. Return on Investment is good, but ROE encompasses everything that goes into a business, therefore giving investors a more realistic idea of how profitable a business will be. Net Present value would also be great to show since it portrays cash flow over a period of time. This is great because then investors can see what cash flows are going to look like over short or long periods of time to assess if the business will be successful in the long run.

3 thoughts on “Convincing Investors

  1. Hello Kaitlyn,
    I enjoyed reading your post! Investors really care about their profits so you are right that you would have to assure them that they would make money from your project. You would also have to make sure they trusted you to be a business leader. The investor would want to know where their money is going and when they would see a profit. I also believe you are correct that calculating the return on equity would be the best process to explain the success potential. Great post! If you would like to read mine, here is the link:
    http://engr312.dutton.psu.edu/2014/10/21/lesson-8-bethany-steiner/

  2. It sounds like you have the right idea about how to go about proving the value of your project to an investor! I agree with Jennifer that sometimes more investors is not a good thing, but it depends on the kind of investor you’re looking at. Lenders like banks, for example, often prefer to spread out the risk on project financing. However I’m not sure that a marketing campaign is really necessary for most renewable energy projects – usually you have one customer, which is a utility company or high-intensity energy user like a manufacturing facility, so marketing dollars might not be well-spent.

    A link to my blog: http://engr312.dutton.psu.edu/2014/10/20/lesson-8-considerations-for-financing-renewable-energy/

  3. I agree that the bottom line is investors want to know what their ROE will be and they want to see everything from marketing to competitors to pending legislation addressed in a business plan! Having worked in private equity, however, I can tell you that it is not always a good thing to have multiple investors. Frequently, especially in a new startup in a growing industry, investors do not want to share their potential ROE with anyone else. It is sometimes best to get the business rolling as much as possible and then find one good investor. That way the investor’s return is not liquidated.

    Thanks again for sharing!

    Jennifer

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