We live in a moving age where a quick response is sometimes valued more than a quality move that brings more in the long run. Investors are also judged by speed in their returns.
After all, returns are measured against time. As an entrepreneur, it is good to keep this in mind.
Long-term vision
As an entrepreneur, you strive to grow and develop your business. Most entrepreneurs have a long-term vision for their business. They understand that building something of value takes time and attention; the cost comes before the benefit. By continually working on your business, you create an organization that is capable of more and more.
With a long-term view, you invest in things that will move your business forward. If you want to grow or acquire faster than your own profits will allow, you often look for financing opportunities in your immediate area or at a bank. The next step is to attract an investor who has the resources necessary to carry out your plans.
Additional investments
Most investors establish investment funds in which third parties can invest. These funds usually have a limited term, often around 10 years. In the first few years (the investment period), investments are made, usually over a period of about three years. In the following period, those businesses should develop and become more valuable.
Additional investments can sometimes be made during this period. Then comes a period when businesses must be sold. In this phase, investments in the company can usually no longer be made. This is also the time when the standard investor picks up another new fund and the old fund is wound up.
Duration
Most investment companies use this term. If that period does not suit you as an entrepreneur, it can cause tension and increase the pressure to make decisions that are especially good in the short term. So when you, as an entrepreneur, start working with an investor, it is important to know how the investor's fund is structured and how long they can continue to invest in your business.
The development of the business should be matched with the term of the fund. An alternative to an investment company with a fund for a specific term, for example, is one with a so-called "Evergreen fund.
Evergreen Fund
An Evergreen fund is a no maturity and long-term fund. It is characterized by an open-ended structure in which investors can join or exit. There is no pressure to sell a company within a certain period of time. Therefore, when making strategic choices, the investor thinks about what is best for the company in the long term because the interests are more aligned.
This becomes especially evident when unforeseen circumstances arise: an economic downturn, a lockdown or some other change in the market that no one saw coming. The long-term investor understands that she will be hit in returns now, but knows that in time recovery will occur.
As an entrepreneur, it is important to carefully figure out what type of investor suits you. That way, you can be sure that your rhythm will run the way you want it to.
