Like any sales process, fundraising can be quite onerous and time-consuming. A systematic process-driven approach can help you effectively pitch yourself in front of many investors and dramatically increase your chances of closure.
The way founders need the right investors, similarly, investors are also on the lookout for promising startups where they can deploy their wealth to receive greater returns. This deal is equally critical to both parties, so ensure that you negotiate the terms better.
The way we curate for co-founders or other senior team positions for the right fit, we should also carefully find the right match for an investor. An investor who understands the essence of startup space, comprehends your mission and vision, is conversant about your industry, commands a good network, and has a history of investing in similar companies could be a vital asset for your startup’s future.
Such investors can contribute meaningfully towards the company’s growth by providing access to their network, help setting up and offering benefits for the infrastructure setup, hiring people, and market information. The wrong investor may not understand the life cycle of your business and may expect the returns too soon or ask for an early exit, even before the business has reached the growth phase.
Rightly matched investors with complementary abilities who are attuned to the founder and company’s vision and engaged appropriately, can act as catalysts hastening our journey towards the big milestones, and effectively supplement themselves as a part of the team.
What questions could be used as a criteria matrix to qualify the right investor?
1. Identify investors who understand your vision and passion; someone who is excited and ready to back you as you are and be ready to help whenever required, in addition to providing funds. Do you want a hands-on type of investor or one who provides feedback when requested?
2. Research the companies that the investors have invested in and the reason behind the investments. Understand the investor’s palate and appetite.
3. Do the investors outweigh the team more than the idea and problem we are solving? Where does he stress on more?
4. Has the investor truly understood your roadmap and expectations? It is always beneficial when both parties align their expectations, roles, and responsibilities, and develop metrics accordingly.
5.Always ask for the references of the companies they have invested in where they are playing a key role. This will give you a well-rounded idea about the pros and cons you can expect based on the investor’s style of work, their likes and dislikes, their long-term alignment, the areas of concern for other investees, etc.
6.Regulatory checks and verifications can be undertaken efficiently by your Legal consultant. Since the Governments of most countries have been tracking Politicians, HNIs for tax evasion, particular firms, and countries for violation of human rights, and so on, the legal team will be able to cover the other aspects by assessing and minimizing risk areas before onboarding an investor.
7. Will the Investor be able to connect the startup to global Investors later in the journey for geographic expansion.
8. The communication after the fundraising should be decided at the outset. What should be the modes of communication, how often should the calls/meetings happen, what kind of updates and frequency of updates, etc.?
Eventually, the contents of the calls, meetings, and updates will evolve as per Investor expectations and business progression.
9.The onboarding process can be streamlined into a smooth process to enable quicker turnaround from the startup side. Startups can reduce investor churn by simplifying the laborious process, through effective and timely communication, by digitizing the onboarding experience to keep progressing on the go.
If you have any additional points to consider please share and we will add them to the blog.
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