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We face the worst economic conditions since World War II. The crash of our major lending institutions, the stock market, and the portfolio value of America’s wealthy has taken a nasty toll on our nation’s liquidity.

I know plenty of folks with a net worth ranging from $500,000 - $2,500,000. Most of my friends and colleagues in this bracket have lost somewhere between 25-75% of their net worth in the last 6-months. This bucket of investors have tightened up their wallets and purse strings and are the least likely to invest into a new or existing venture.

People with a net worth of $2.5 million+ are just as cautious, but will invest if the model looks right, especially right now since most of the real losses have came and went.

Generally, smart investors appreciate a conservative business model, and expect to see the business losing money for the first 12-18 months. Now, these investors are looking for a “sure thing” and a “no risk.” Obviously, every new business is a risk. To attract investors I suggest the following:

1) Build a business that can achieve quick profits

Investors want to see value, and returns. If you have a solid model that shows a quick profit turnaround you are more likely to get interest. Your business model should show profitability occurring within 6-months.

2) Seek short-term loans and offer convertible stock or notes with a 10-25% coupon

Many investors are looking to make a quick buck, with low risk. Look for a 6-12 month loan, and offer a competitive interest rate. A 15-25% annualized return is compelling, competitive, and not overly aggressive. I prefer balloon payments to maintain cash reserves. You must maintain up to date financials, technical appraisals, etc., to ensure you maximize your business valuation. Give your investors the option to convert their loan sum into company stock or notes. The coupon allows them to “buy-in” at a discount.

3) Focus on what you know, and tout your background and historical results

Investors want security, and a track record. This is not the best climate to venture outside of your comfort zone. If you have a background in developing successful IT sourcing companies, then you should consider sticking in relevant industries. Now is not the time to pitch a frozen foods idea. Make sure your bio resonates well with your pitch concept. Keep your Executive Summary to 2-3 pages tops, and make sure your bio is included.

4) Stay away from losing industries

Stay away from industries that have been hit hard by the economy. Real estate startups (note: there are many opportunities here, but you should be very selective - added per commenter suggestions, and my agreement), mortgage lending, landscaping business, etc. are all tied to the broken real estate market, and savvy investors will run for the hills if you pitch these businesses. Try to focus on businesses that thrive and flourish in a down economy, i.e. A/R factoring, foreclosure rescure kits, etc.

5) Create quick wins, and get testimonials

Nothing compares to investor trackrecord. Once you’ve successfully re-paid investors, or have converted debt to equity, it is vital to get written testimonials. Approaching new investors with early wins builds confidence and security with your new investors. This is also cruical for refinancing existing debts, especially if you have upcoming balloon payments. It’s a good strategy to raise money even when you have cash reserves. This makes paying your investors back much easier, and sets the stage for easier funds down the round.