Dear Professor Investor, Why is it important for me to have my own money invested in my startup before reaching out to investors? Pam from Ithaca
Investors are looking for what is called: skin in the game. They want to make sure that you have invested your own time and money into the company before they do. Investors want to know that you have something to lose. Investors want to know that you won't leave the venture before they can get a return on their investment. Why should an investor put up their money if you haven't put up yours?
By having skin in the game you are showing the investor that you committed and all in. The amount doesn't matter so much as long as it is enough to display your level of commitment. After all, Investors are not looking for ideas they are looking for people because people drive a company to success. If you are not 100% invested in your own venture that is a red flag to most investors. Skin in the game varies for each entrepreneur. If you are just starting out and this is your first company just having a maxed out credit card and having money from your friends and family invested may be enough to demonstrate your commitment level. But if you are a successful entrepreneur who has had a successful business beforehand you will usually need to invest more money in your company before anyone else does.
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