I’ve usually seen younger startup entrepreneurs operating from pillar to put up, seeking to elevate funds. Their intent is to pay money for an investor who’s satisfied of their startup’s future potential and agrees to put money into their startup. Almost all the time, startup founders wish to make this whole journey, proper from figuring out a possible investor to lastly getting their cash channelized into the startup, a fast one with the least turnaround time.
But is that the precise perspective? As a startup entrepreneur, one ought to look past convincing and channelizing an investor’s cash into the enterprise. If one desires to see one’s startup develop as a sustainable and scalable enterprise, then an entrepreneur must be picky concerning the investor that’s introduced on board as a associate within the enterprise.
Merely getting maintain of an investor who is able to put money into what you are promoting, be it an angel or a VC agency, is just not sufficient. You have to do your homework properly. Conduct detailed analysis on the investor – the fund dimension, their current investments, their relationship with their portfolio firms, the worth they’ve added to their portfolio firms by means of their board seat, how worthwhile their exits have been, what their trade credibility is, are they recognized to assist their portfolio firms by means of market cycles. You don’t wish to pursue an investor whose funds is likely to be on the downhill or whose credibility out there is questionable.
Even if the investor scores positively on each side that we mentioned above, it will be important so that you can be sure that the investor is aligned along with your firm’s mission and imaginative and prescient. You wouldn’t need a scenario the place the investor desires you to compromise in your values or mission/imaginative and prescient for the sake of short-term enterprise profitability. Getting right into a financial affiliation with somebody who doesn’t respect your mission/imaginative and prescient is barely calling for bother within the medium time period.
It additionally is sensible to look into the investor’s monitor document and discover out whether or not they have traditionally gone into funding repeat rounds of funding. While this may not be necessary, to establish and affiliate with an investor who has a monitor document of repeat investments means you may have excessive probabilities of not needing to scout for traders at each spherical sooner or later.
Another issue that ought to decide your selection for an investor is how a lot affect does the investor have out there? Besides the cash that they put money into you, traders who’re nice influencers normally are likely to deliver you a variety of credibility from completely different points of the market, together with media, clients, and mentors. If you’re a startup attempting to attract consideration to your self, a reputed investor backing is instrumental in serving to you make the specified noise.
Remember that when an investor chooses to speculate cash in what you are promoting, they usually anticipate a specific amount of management in your operations. Therefore, earlier than signing on the dotted line and accepting that all-important funding from the investor, discover out what their present beneficiaries say about them, how demanding they’re in forcing their manner in day-to-day operations. While it’s crucial that your potential investor ought to perceive what you are promoting very well, it’s equally essential that they play the position of a “guide” greater than that of a “boss”.
The author, Monica Mehta is Executive Vice President, National Entrepreneurship Network (NEN) at Wadhwani Foundation. The views expressed are private
