For the majority of startups, securing the necessary funds is almost always a high priority. After all, achieving investment bridges the gap between having a great idea and building a successful business. However, a common mistake many founders make in the fundraising process is focusing more on the money than the person who’s investing it.
Investors offer so much more than financial support – we can provide business advice, make key introductions, motivate and inspire teams and facilitate business growth. Choosing a VC fund and an investor for your startup is therefore one of the most critical decisions you can make as an entrepreneur. Speaking as someone who was an entrepreneur before becoming an investor, I know that it’s essential that whoever you receive money from is a great fit for your business.
Here are five things to consider when choosing your investor.
(1) Someone who trusts in your vision
An investor should aim to strike a balance between offering productive advice without trying to take control. As a founder, you don’t need someone to take the wheel, you need a navigator and an advisor. It’s important to find an investor who understands your vision for your business and understands that you might make mistakes along the way, someone who trusts you to make the right decisions while offering a helping hand if needed.
(2) A valuable network
Networks are important, because knowing the right people can open many doors and offer up new opportunities which otherwise would not have been available to your and your business. As an investor, a big part of what I offer my portfolio companies is my connections, so when you’re looking for the right VC fund to connect with, it’s important to assess whether an investor will introduce you to people who can move your business forward.
(3) Experience in your industry
A key part of your due diligence should be finding VC funds that work in your space. This doesn’t mean a basic understanding but detailed knowledge about your industry, best practices and how to apply them. Having an investor who can not only advise you but also teach you and ask you tough questions is extremely valuable. Good investors will immerse themselves in their chosen sector to offer the best value to their portfolio companies.
(4) They fit your brand and culture
Good culture attracts capital and it really is a consideration for investors looking to fund your startup, but it’s equally important the other way around. The likelihood is that an investor will be on your board and will have a say in making decisions related to your brand, therefore it’s essential that you choose an investor who will be a great fit for your company culture. You need to establish the kind of role your investor will have in the business, whether their vision differs from yours and whether they will ultimately mesh with your company culture.
(5) Time and commitment
How many portfolio companies does your potential investors work with? What can you expect in terms of communication? How frequent will your interactions be? Will they be there when you need them? These are all questions you need to consider before partnering with an investor – we’re not all made the same, and one investor might be able to commit more time to you than another. If an investor will bring the money, but little else, they might not be right for you.
When you’re raising funds, it can certainly feel tempting to accept the first offer that comes your way. But who you pick as an investor – someone you chose to share your business with – can be a make or break decision. Ask questions and do your research to determine the kind of investor your company really needs and above all, find someone who can not only act as a financial backer but a mentor who will help your business grow.