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Published:October 6th, 2008 19:35 EST
How are Gamblers Like Investors?

How are Gamblers Like Investors?

By Joel G. Block (Mentor/Columnist)

If you want to know how investors put money into deals, spend a day at the horse racing track and you`ll understand the process perfectly. Before I say another word on this topic, let me warn you that angel investors and others take great offense to this logic " which probably confirms that it is true. Read on at your own risk.

At the track, gamblers have many different bets to choose from and they choose those bets in the most unusual of ways. Go and study some of these gamblers and you will understand a lot about the investor mind-set.

Some of the gamblers will be studying the newspaper or racing forum to analyze past performance. Some of them will be looking at the sky, the clouds, and the turf. Others will study carefully the horse, the muscles, and the sweat. Some will look at the jockey and the way that he presents himself among the field of other performers. Some will simply look at the color of the outfit, the name of the horse, or the name of the Jockey and find some superstitious reason to go with one of those horses on the field.

In any event, there can be sometimes 13 different choices presented to the gamblers and there`s a myriad of ways that the gamblers evaluate the field of choices. But one fact is certain. At the end of the evaluation period " which lasts sometimes a half an hour or longer if the gambler shows up early to do extra research " the gambler will walk up to the window and put the money on the table. At the end of the day, they`ll pick one of the choices and go with it. The choice might be based on the odds or it could be based on any of the other factors that I`ve already described but something`s going on in the mind of the gambler and they end up betting on one of those choices.

It`s not very different in the investment business. Investors try to be scientific. But this is not a scientific game. We are making bets on horses and jockeys. Some businesses are better than others and some management teams have a better track record of success with a greater likelihood of bringing the deal to the finish line.

I have many different ways that I evaluate deals and so does each investor have his or her own methodology for making decisions, but at the end of the day, each investor has to pick a horse and go with it. At the end of the day, everybody walks up to the window and places a bet.

The question for the entrepreneur is: "how do you get somebody to bet on your horse?" When somebody has many choices, ultimately you have to be worthy of the stewardship of their capital. You have to tell a story that tells people why they should bet on you and your business. If you do a good job of telling them that you have the fastest horse, the best horse, the strongest horse or the horse with the most endurance and that you`re going to make it to the finish line, then you just might be able to attract investors to come to your window.

But even when the best horse or the best company gets its capital so that it can go to market, it can get stuck behind a pack of slower horses keeping the best horse from taking the lead. There are never any guarantees or assurances in the investment business.

So, as you are working hard every day to build your company, or as you`re building your career, make sure that you`re building an investment that somebody would want to bet on. Always remember that bankers, lenders, shareholders, and investors of all kinds have many different choices. And you have to make yours be the one that they want to put the money on.

About Joel G. Block, President of Growth-Logic, Inc.
Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com. Also, be sure to check out our newest project: a blog to organize the blogs that cover entrepreneurship - http://www.entrepreneur-hub.com. And finally, for film makers: http://www.filmfundingblog.com - our newest project.