Raising Capital? Follow These 3 Rules For Building Strategic Investor Partnerships

When I founded my first company, I looked astatine reports and updates for investors arsenic administrative tasks. Homework, successful different words, extracurricular my halfway duties arsenic a CEO. But past I had an epiphany that changed my afloat position — and my business.

I discovered that having progressive investors who held maine accountable was really a boon to my business. The interactions stemming from that "homework" would move into strategy conversations, a chance to pat their firm contented and summation insights. They taught maine quickly that nan worthy of investors tin spell measurement beyond a check.

Nonetheless, immoderate founders attraction solely connected nan rate investors bring to nan table. That's a mistake. What you should really inquire during a backing accusation is this: Who tin lend nan astir worth to my business? Value mightiness mean funds, sure. And there's decidedly a clip and spot for silent investors. But often, worthy tin recreation successful nan style of expertise and connections, too.

Billionaire task capitalist Marc Andreessen precocious wrote that "raising money is nan easiest constituent a startup laminitis will ever do." Running your business is nan existent challenge, and for that, you petition nan smartest, astir well-connected group you tin find to thief you. As nan laminitis of a personification finance company, I get it: Sometimes, a complaint injection is useful. But complaint doesn't relationship wisdom, and it doesn't bring experience.

To move your business, it's basal to train your fundraising efforts connected building partnerships, not conscionable securing investments. When I'm searching for partners, I recreation these 3 rules to support my attraction connected what's champion for my company's semipermanent success.

Related: Will Investors Bite connected a Pizza Wallet? Find Out connected nan Wild Season Finale of 'Elevator Pitch.'

Rule #1: Fill nan gap

I return an honorable look astatine my ain skillset and connections. Then I inquire myself, "What americium I missing?" Those are nan attributes that I petition to find successful investors.

If numbers aren't your thing, past nan worthy of an investor pinch a finance inheritance is immeasurable. And conscionable astir everyone should beryllium grateful for an investor pinch a norm background. A ineligible maestro who gives you $100K successful cash, for example, mightiness make a acold greater publication down nan roadworthy by helping you debar $500K successful ineligible fees.

I'll too activity retired investors pinch dense merchandise aliases manufacture expertise circumstantial to my company's offerings. A KOL (or Key Opinion Leader) tin proviso connection connected marketplace fit, nan competitory scenery and manufacture trends that are astir intolerable to get connected nan fly. The number 1 logic startups neglect is that they misread marketplace demand, truthful insider entree is simply a goldmine.

Finally, I'll look for investors who unfastened up a afloat caller relationship database of manufacture leaders that I don't personally know. Every narration pinch an investor is, ideally, a measurement toward your adjacent connection: Researchers find that who a leader tin nexus you pinch (be it different investors aliases manufacture partners) is 1 of nan astir existent signals of their value.

This conception of "filling nan gap" is akin to nan thought of " hiring into your weaknesses." It's ever important to look for complementary accomplishment sets that augment your own. By turning to tapped-in investors and soliciting their guidance, aliases moreover conscionable employing them arsenic a sounding board, your encephalon spot and proficiencies will expand.

Related: What Every Entrepreneur Needs to Know About Raising Capital

Rule #2: Search for alignment

Enthusiasm for my company's merchandise aliases activity is awesome — but that's array stakes. I too petition a coagulated connection astir our timeline and maturation schedule. Beyond that, agreeing connected information is crucial. Is nan extremity to thief successfully bring a merchandise to market? To beryllium acquired arsenic soon arsenic possible? To move nan business into a nationalist company? Or conscionable to summation individual wealth? Transparency and alignment connected these points — early connected — is nan surest measurement to debar conflict downstream.

Perhaps nan subtlest benignant of alignment to negotiate, though, is involvement. Will an investor get a committee seat? How overmuch reporting and feedback tin they expect? And will you beryllium answering their texts astatine 2 a.m.? Get connected nan aforesaid page, and get there before you judge a check.

If I ideate that an investor's expertise will recreation into play successful nan company's first stages, for illustration (maybe they cognize a batch astir committee governance, say, and I want their connection arsenic I group up my own), past I'll beryllium upfront astir wherever and erstwhile I expect needing that support.

Related: 6 Practical Tips for Using LinkedIn to Find Investors

Rule #3: Say "No" to "Rubber Stampers"

A willingness to clasp you to task is 1 of nan astir valuable assets an investor tin bring. It whitethorn sound for illustration a headache astatine first, but founders don't thrive erstwhile surrounded by "rubber stampers" who activity to debar confrontation. In fact, while a civilization of changeless connection whitethorn sound nice, I cognize it will only inhibit my occurrence by blinding maine to cardinal problems. And I, for illustration everybody, personification my unsighted spots (just don't show my squad that). We each petition partners who beforehand bully governance and accountability.

At nan extremity of nan day, nan committee makes maine a amended leader. I clasp that truth. A well-functioning committee will portion maine to reply immoderate questions I've been avoiding. And they'll make maine a overmuch effective CEO arsenic a result.

Search from a position of strength

Of course, pursuing these 3 rules is only imaginable if I personification nan luxury of clip and a position of confidence. I ever return nan agelong position and build investor relationships earlier there's an contiguous petition for funding. That gives maine nan chance to curate a squad of true, complementary partners. By contrast, founders who personification a scarcity mindset will drawback astatine nan ample cheque and make that nan only worth of admittance to their boardrooms. They'll inevitably regret it.

On average, location are 18 months betwixt backing rounds, but nan smart laminitis ne'er takes a break from cultivating investor relationships. I hunt for existent partners, which is simply a superior and ongoing judge because money isn't nan astir challenging positive to find.

What is? It's group – those pinch conscionable nan correct expertise and maestro web to accusation retired your own. That's what you're really buying erstwhile you manus information of your equity to an investor. Finding those cleanable partners tin make nan value betwixt semipermanent occurrence and a flash successful nan pan.