The irony is that people and institutions that have money to invest are spending time and energy just LOOKING for places to put that money to use while at the same time, tens of thousands of businesses die every year because they don’t have enough funding. These two groups are passing each other like email sent to the wrong account. WHY? Because in many ways they don’t think alike. You know how an optimist sees the glass half full, a pessimist sees the glass half empty and an engineer sees that you’ve got twice as much glass as you need?

If you want to catch fish, you have to think like a fish, go where they hang out, give them bait they like. If you want to catch capital, you have to think like an investor, not just like an entrepreneur.

I’ve been on both sides of this issue and I know there’s a big difference in the way they think. Entrepreneurs see opportunity; they are optimists. They have to be to keep chugging along through all the hard work it takes to get a business off the ground. So they tend to see the reward that will come with success.

Lenders and investors approach things differently. I wouldn’t exactly say they are pessimists (otherwise they wouldn’t be investing in start-ups or young companies) but they are the types that might wear a belt along with suspenders. A person who has money to lend or invest is most interested in making sure they don’t loose that money. They tend to look at the risks where an entrepreneur sees only the reward.

So how do you catch a capitalist? You have to have a story (contained in your business plan) about your business that explains not only the potential upside, but shows that you’ve considered the down side. And not only that you’ve considered it, but also that you’ve done everything you can to minimize it. If you can’t do that, investors won’t care about the reward.

The price you pay for the money you need is in direct relation to the amount of risk. When you ask for money you have to tailor your story to the person you’re telling it to. I don’t mean you bend the truth, but you make sure the proposal contains the parts that they most want to hear.

Jon [didn't post last name] gives his experience on both sides of this coin on his blog.

Takeaways:

• Focus on minimizing the chance of loss – not inflating how big the rewards might be
• The less risk there is, the cheaper will be the money you’ll get. Bank money is the cheapest because they take the least risk.