I had the pleasure last week of attending this year’s Startup Buzz. The theme this time around was Finding the Funding.
After this same event last year I shared the main criteria investors examine to select whether or not to invest in a new startup.
This year the panel discussed various aspects of the planning that must go into finding investment.
Confirming: People and Opportunity are key
Investors must believe that a business has the right people and a viable business opportunity before investing. But, even when they get it right, business owners can be short-sighted about this.
The right people may change over time – a new business and a business in adolescence and maturity may have different needs, and thus different people. A good team consists of the right people to grow the business over time and environmental change.
And the market opportunity is both about current clients and continuous growth.
The first word I use above is “people”. No matter how good the business opportunity, if the personalities do not mesh well or the investor does not have faith in the business owner, investment is impossible.
Both parties must understand their commitment to one another: money and a profit motive will tie these people together through what will be both good times and challenging times. Can the two parties trust one another? Will they be comfortable occasionally disagreeing with one another, sharing or hearing criticism?
A business owner must also see an investor as more than money. Choosing an investment partner that can bring a specific additional advantage to the table – whether relationships, experience, mentorship, etc. – and being explicit about this expectation will strengthen the relationship further.
Being committed to the same goal, the some work ethic and the same expectations is key. And for the long term.
Build relationships with investors before you are fundraising. And raise funds when you don’t need them.
Considering the relationship and commitment involved in the investor-entrepreneur connection, a business wants to be well positioned when it actually starts pitching. To achieve this, it should be aware of a future need to raise funds. Yes: foreshadowing.
An entrepreneur should be networking with and meeting potential investors a good 18 months before starting to pitch. Indeed it is a good rule to build VC and Angel relationships continuously anyway.
As for raising funds when they are not needed: no investor wants to give somebody money to help the business survive. They do it to see the business grow and reap a hefty return.
An entrepreneur must not forget the larger team involved in fundraising.
There is the business team: founder and employees; and then there is the fundraising team. This includes attorneys, accountants, evaluators, advisors, whoever is required. These relationships are just as important and will play a central role in any successful investment pitch and negotiation.
Thank you again to the GA Tech Business Network for the well planned event and instructive panel of speakers.