Having the right investors on board can make a world of difference for your business. They provide the kindling for the bonfires that entrepreneurs hope to ignite and add substantial value beyond cash by making key introductions and giving critical advice.
However, for first-time entrepreneurs finding, wooing, negotiating with, closing, communicating, setting expectations, extracting value and introductions, and building long term relationships with investors can be a fraught and opaque process. So here are a few steps early founders need to keep in mind to groom up to be an investor-friendly start-up.
Where can entrepreneurs find investors?
Good old fashioned networking. Look up investor groups online. Ask investors who they syndicate with or what other groups they know about. If you happen to know any venture investors, then ask them for recommendations that might be a good fit.
What are the questions that founders shouldn’t forget to ask?
How many other deals have they done? Over what time span? How recently? How much would they consider investing if they like what they see?
Often, the investors that ask the most questions and require the largest amount of time are the ones who invest the least. At the end of the day, remember to always treat them with the utmost respect. Even small amounts of capital are real money that someone worked hard to earn and he/she is now considering entrusting you with it.
How can you get them to actually write a check?
Instil a sense of urgency amongst them. One good way to do this is by setting deadlines. Once they start to express interest then set a first closing date and a subsequent second closing date. Give perks to those that invest by those dates, with more perks going to those who invest by the first and less for those who invest by the second.
Discuss these dates with the investors before setting them so they can meet the deadline. They might need time to move capital around and/or might want to look under the hood a bit more, etc.
At the end of it all, be honest and do what’s right. Follow the golden rule: Treat investors like you would want to be treated and that will set you on the right path to success.
At Nordic Intent, we provide data-driven insights and startup legal tools so you can grow your company without the headaches. Get in touch with us to know more.