Investors Time
Identify Best-Fit Investors and Make them Chase You
Your launch was a success and now you finally have some concrete data about traction, growth and revenue streams. This data is extremely valuable because this is the first time you can actually compare your financial model based on assumptions and your real life data after the launch. Analyse how much do the base financial model and the real data diverge and update your financial model in case you think the data is stable enough for a new long term projection.
Ideally, you had a successful launch and 3 months of steady growth and revenue. Be ready to show the data to the investor.
But first…
How to Think of an Investor
One of the big milestones after building your core team is to find the best-fit investor for your company. You will work with this person for years to come and they will sit on you directors board. Don’t look at the investor as a scary person with money. Look at them as an ally that believes in your project and understands that you both have mutually a lot to gain from your relationship.
I’m confident that this mindset will help you choose a better investor to work and share your journey with.
Remember, you are valuable. They wouldn’t be discussing your pitch with you if you weren’t. Respect yourself and have in mind that the investor has to sell himself to you, in the same way you are selling yourself to them. The interaction is a two-way street. Show them you understand the terminology and both your own and their terms for the deal.
Do your homework and come prepared. Show them respect by being ready to handle a constructive conversation in the field that they strive in.
Read Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist and learn about the tips & tricks of the game. It will make you look professional and help you filter investors that want to screw you up or are inexperienced. Ask questions yourself and don’t answer things you don’t know. You can always get back to them and it is much better than saying something stupid.
OK, now when we understand that investors are humans, too, we can address other important points.
Find an Investor that Understands your Market and Business Model
Knowing your business model is crucial and it will help you filter and choose the right investors. You will not have a lot of time on your hands, since you will be doing 10 things in one day, so you must be able to filter investors quickly and see who fits you best, based on available investing money and experience with the type of business that you are building.
For example, StyleReply is a fashion matchmaking platform that connects stylists and clients through video call. Our goal is to find an investor that has money, knowledge about fashion and a strong network in the fashion industry and marketing channels. Furthermore, we must find someone that understands the marketplace business model (matchmaking) and that it requires more marketing money in order to reach critical mass. In case our investor doesn’t have experience with marketplaces, it will be difficult to justify our budget allocation. We are wasting our’s and the investor’s time in the process.
Types of Investors
- Angel (normal, super, groups, syndicates)
- Accelerators
- VC funds
Sources where to Look for Investors and be Seen by One
Why Should you Build your Advisor Board First and then Contact Angels, Accelerators and VC Funds
Don’t chase investors. First, build your advisory board. Investors will come.
Advisors
Build an advisory board first. It opens a pool of connections and valuable advice for your business. It shows that you understand what are you building and what are the key people/advisors that can increase your chances of success.
Advisors have first hand experience in building companies and market trends. This experience goes closely with strong connections that can get you closer to be recommended to an investor. A lot of investors don’t even take your startup into consideration when you contact them directly. They simply think you are not resourceful enough if you can’t find someone to make an introduction for you.
Understand your advisor’s way of working. Don’t ask the advisor to introduce you to investors if you haven’t prepared all the data that they advise you to. They will ask you to show growth, traction, revenue and to define CAC and CLV on which you base your financial model. Their name is on the line so be careful what you ask for and how do you handle the advice you get.
In case your time/money/feature combination is low on resources and you are having trouble defining the elements above, hustle some other way and try to get the most of it through other channels. Just don’t force your advisors to back you up in case you are skipping some steps and don’t follow their advice in full. It could make them uncomfortable. In the end, your word is the final word. Shape your company and decisions and blame only yourself for bad decision making.
A better understanding of duties and responsibilities as a Founder can be found in the bible of entrepreneurship:The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers - Ben HorowitzNOTE: Your problems will probably look like camomile tea compared to what Ben had to go through.
Accelerators
A way to get the first push in the right direction can be also achieved by joining accelerators. Accelerators have mentors who will act as your advisors and they will help you shape the product, make valuable connections and call in investors on demo day, where you will be able to present your work and hopefully get funding. So, in a way the mentors are your advisors and will help get investors chasing you. Accelerators can potentially offer a wider pool of mentors than you can find yourself by searching for advisors. The process of going through an accelerator can speed up your progress drastically and confirm your value to outside observers.
Bottom line, visualise the steps that enable you a steady, thoughtful progress of the company and growth of credibility. The beauty is that you can run the steps presented in this startup series in parallel. You can start building your advisory board early in the life of your company and help yourself in the process by letting people know about you from the start.
Show your Work to Investors
It is time to show your work investors. You have to create your pitch deck now.
I will leave you with this one. This is another extensive topic and an extremely creative process. The time has come to summarise all the things that we’ve discussed in the previous posts down to 10-15 slides, and present them in a challenging and attention grabbing way with the goal of finding the best-fit investor for your business.
If you played your cards right and had a dose of luck, you will get funded now and continue your journey to building an amazing company.
Good luck!
Final blog post is around the corner! Read the final roundup in Part 7: Pushing Blocks. I present you with an analogy of what building a startup means and how to build your company and tackle the different tasks with the right mindset in place.
Stay tuned and recommend and share if you like.
Feel free to contact me or drop a comment below with your experience and how would you expand the Investors Time insights. We can improve the post together based on your insights.
Would love to connect with marketing and sales hustling individuals. Drop me a line.In case you missed any of the previous posts, check an overview of the blog post series here.
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Ending with a quote:
“If you are going to eat shit, don’t nibble” — Ben Horowitz
