A lot has been said about how founders need to prepare for their funding pitch and how they should respond to investor questions. But an aspect that many seem to overlook is finding the investor-founder fit.
Founders need to closely work with their early-stage investors to scale up their business from zero to one; having the right investor on board can make or break the business.
In the early stage, it is not just about the funds but also about what the investor brings to the table for its progress. Hence it is crucial for founders to research well and maintain a list of requirements they would want help with from their investors and search for them accordingly.
Here is how founders can work on ensuring investor fit before accepting the cheque:
Researching the investors
Once you decide to raise funds, the first crucial step is to research your prospective investors and ensure that they have expertise in the field you are working in. Make a list of requirements that you would like your investor to have and make sure you reach out to only those who can tick off your needs.
Mentorship from the investors in the early stage is crucial for the startup’s success. In fact, having people from the same field or expertise will bring new ideas for growth. Before deciding on an investor, founders must research their previous investments, and understand how they work with their portfolio startups.
On-board investors who share your goal
Indeed investors are in the deal to earn returns but it is also important that they are passionate about the problem you are solving and can connect with it. Shared interest towards solving a problem forms a major contributing factor towards establishing a strong investor-founder partnership. Understand their investment style and ensure that their ideas and advice will be helpful for your business.
Founders should also be mindful of the fact that while there is a lot of room to learn from the investors, in some cases they need to believe in their own decisions and stand their ground. While a founder should always remain open to learning, it is crucial to ensure that the startup doesn’t lose its focus to meet investor demands.
Evaluate investor expectations
While raising funds, founders are advised to ask the potential investors about their expectations from the deal and have honest conversations with them including the size of the deal, valuation, timeline for achieving the milestones, returns and exit strategy.
With this, not only will you have clarity but even the investors will be able to set realistic goals based on the current company health. It is important for founders to be transparent about the challenges that the business may face in the future and how they plan to survive them.
In the early stage, an investor's network might become crucial to help the portfolio startups scale. Early investors can help founders by connecting them to industry leaders who can share their knowledge and experience with the portfolio in the long run.
Founders should not only stay connected with their own investors but also build relationships with those who may have rejected them. Staying connected with them and sharing regular updates about the business will help you seek guidance and feedback from them.