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When I began my first company, I treated investor reports and updates as administrative tasks. In other words, homework beyond my core duties as CEO. But then I had an epiphany that modified my entire perspective – and my business.
I discovered that engaging investors who held me accountable was actually a boon to my company. The interactions resulting from this “homework” would turn into strategic conversations, a likelihood to tap into their collective wisdom and gain insights. They quickly taught me that investor value can go beyond a check.
However, some founders focus solely on the money that investors bring to the table. This is a mistake. What you actually needs to be asking during a funding round is: Who can make the biggest contribution value to my company? Value can mean funds, sure. And there is definitely a time and place for silent investors. Often, nevertheless, value also can come in the form of experience and connections.
– billionaire enterprise capitalist Marc Andreessen recently wrote This “Raising money is the easiest thing a startup founder can do.” Running a business is a real challenge, and you would like the smartest and most connected people you could find to make it easier to. As the founding father of a consumer finance company, I understand: sometimes you would like an injection of money. But money doesn’t buy wisdom and it doesn’t buy experience.
To grow your corporation, it’s essential to train your fundraising efforts to build partnerships, not only secure investments. When looking for partners, I follow these three principles to focus on what’s best for the long-term success of my company.
Rule #1: Fill the gap
I take an honest look at my skill set and connections. Then I ask myself, “What am I missing?” These are the qualities I want to find in investors.
If you are not a fan of numbers, the value of an investor with financial experience is immeasurable. And almost everyone needs to be grateful to have an investor with legal experience. For example, a legal expert who offers you PLN 100,000. dollars in money, could make a much larger contribution in the future, helping you avoid $500,000 in legal fees. dollars.
I may even look for investors with in-depth knowledge of products or industries related to my company’s offer. The KOL (or Key Opinion Leader) can provide advice on market fit, competitive landscape and industry trends that is almost unattainable to obtain on an ongoing basis. The reason number one The failure of startups is that they misread market demand, so access to confidential information is a goldmine.
Finally, I’ll look for investors who will open a completely recent list of contacts to industry leaders that I do not know personally. Ideally, every connection with an investor is a path to yours Next connection: Scientists find who a leader can connect you with (whether other investors or industry partners) is one of the most concrete signals of his or her value.
This concept of “filling the gap” is similar to the idea of ”filling the gap” hiring into your weaknessesIt’s at all times necessary to look for complementary skill sets that may expand your skillset. By reaching out to the investors you’re employed with and asking for their guidance, or even just using them as an advisor, you’ll increase confidence in your brain and skills.
Rule #2: Look for alignment
Enthusiasm for my company’s products or services is overwhelming – but it’s all about price. I also need a solid agreement on our timeline and development timeline. In addition, it is crucial to agree on motivations. Is the goal to help bring your product to market successfully? Down be acquired as soon as possible? Transform your organization into a public company? Or perhaps just increase your personal wealth? Transparency and agreement on these issues – at an early stage – is the surest way to avoid conflicts later on.
But perhaps the most subtle variety of agreement to negotiate is commitment. Will the investor get it? seat on the management board? How much reporting and feedback can they expect? Will you respond to their texts at 2 a.m.? Get on the same page and get there before you accept the check.
If I imagine that the investor’s knowledge shall be used, for example, in the initial stages of the company’s activity (perhaps he knows a lot about board management, let’s say, and I want his advice when starting my very own), then I shall be honest about where and when I expect need this support.
Rule #3: Say no to “stamps”
The willingness to challenge you is one of the Most worthy assets an investor can bring. It may sound like a headache at first, but founders don’t thrive when surrounded by “rubbers” who try to avoid confrontation. In fact, while a culture of constant communication may sound nice, I know it’ll only hinder my success by blinding me to the key issues. And like everyone else, I have my weak spots (just don’t tell my team that). We all need partners who promote good governance and accountability.
Ultimately, my board makes me a higher leader. I accept this truth. A well-functioning whiteboard will force me to answer questions I have been avoiding. They will make me a simpler CEO.
Search from a position of strength
Of course, following these three rules is only possible if you have the luxury of time and self-confidence. I at all times take a long-term view and build investor relationships before an immediate need for financing arises. This gives me the opportunity to create a team of real, complementary partners. Conversely, founders with a scarcity mindset will take the big check and make it the only price for entry into their boardrooms. They will inevitably regret it.
On average they are 18 months between financing roundsbut a sensible founder never takes a break from cultivating investor relationships. I’m looking for real partners, which is a serious and ongoing practice, because finding money is not the most difficult asset.
What is it? These are people – those that have the right knowledge and skilled network to complement your personal. This is what you purchase when you give some of your capital to an investor. Finding the perfect partners could be the difference between long-term success and a flash in the pan.