It’s common knowledge that finding the right investors at the right time might be crucial to a startup’s success. This truth is at all times a priority for founders who raise enterprise capital.
While it’s somewhat standard practice to develop an idea with friends and family and then angel investors, things get more complicated as startups approach early stages and start raising more rounds. Having investors who provide tangible support beyond money—at the right points in a startup’s trajectory—might be crucial to scaling beyond expectations. Here’s why.
Stages of building a startup
Building a startup is a multi-step challenge. Day one is about hacking value and going from zero to one. Founders need to discover product-market fit and prove that the idea might be built.
This step is entirely up to the founders, and they will often fund it themselves through friends and family or angel investors. Once they do that, they need to build what you would possibly call an MVP—minimum viable product—which requires more capital and operational complexity.
There are other nuances to this phase of hacker growth: product and sales operations need to be established, key hires need to be made — and all of this needs to occur in parallel and at a high level of quality if you wish to turn into a company of scale. Once all of this is in place and working well, the founders officially start building the company and move from early stage to growth-stage enterprise capital funding.
The Real Value of Early Stage VC Benefits
Early stage enterprise capitalists often pride themselves on being directly involved in the operations of their portfolio corporations: offering marketing, legal, accounting, recruiting, operations, sales, mentoring and other services either internally or through various networks.
During those first few stages, when budgets are tightest and growth have to be fastest, these deals can have a huge impact. Founders who know how to best leverage these resources will have an advantage over their competitors—those that get early checks from investors that disappear after the deal is signed are missing out on what the investors provide.
One of my favorite examples of how early-stage support centers can assist create scalable foundations for early-stage startups—sales, operations, or staffing. The goal of an early-stage company is to achieve the most hyperbolic growth possible with the right infrastructure to support it at scale.
Many startups are fortunate enough to experience rapid growth but get caught in a constant game of catch-up as they develop systems to handle that growth on the fly. I’ve seen corporations with incredible products fail to grow because their infrastructure couldn’t sustain with demand. Having an early-stage enterprise partner with the right offering could prevent that struggle and maximize that early momentum.
Connecting Early Stage and Growth Stage Investors
As startups move from seed to Series A, it may well make sense to bring in growth-stage investors along with practical early-stage investors—especially if those early-stage investors have done what they needed to do in pre-seed/seed. At this point, raising more “spray and pray” funding might be helpful, but founders ought to be careful not to raise too much too early. Having a solid group of practical early-stage investors sets the stage for success when growth-stage conversations begin.
Conclusion: Check your investors
Founders ought to be diligent about vetting their investors at every stage. Finding VCs who can deliver value across the business from day one is essential—it’s about greater than just money. Finding the right people in the right roles at the right time is the way to succeed at every stage and achieve your goals.
In short, the value propositions of early-stage enterprise capitalists and how those offerings fit into the startup’s strategy are incredibly vital for early-stage founders. In addition to having to navigate the challenges of startup growth, the support and resources provided by hands-on, deeply engaged investors are a huge shortcut to rapid, sustainable growth.