“You don’t start a company for your investor, you build a company for customers.”
Choosing a wrong investor is a cancer for your startup and onboarding right investor can accelerate to company’s long-term growth. Choosing a right investor is as important as choosing a co-founder. During the investor hunt process, you will come across various type of investors and finding a right match is a cumbersome process. Remember no one is favoring you by investing in your startup, they are doing because they also want to make money with you.
“Not all money is good money, no money is free money and money from wrong investor is a most expensive money.”
I would like to classify investors into two categories, one which I would call as ‘growth enablers’ and second one as ‘toxic investors’. Toxic investors are those who don’t understand the idea, can add no value to the growth, and invest ONLY for money. Yes, growth enablers also invest for money, but in return they also contribute to the idea and help to widen the entrepreneur’s perspective.
Here are a few key points to consider during your investor hunt for your startup:
- Understanding of the idea – Investors who understand the idea and know the potential of it can only be able to match your wavelength. Look for the investors who share the same vision as yours, check out their existing portfolio, and also see how their existing portfolio companies have grown. If an investor understands your idea and the technology that you are trying to build, then there is a higher possibility of a long-term relationship.
- Avoid toxic investors – There is a common notion that you cannot be choosy while seeking for an investment. But if you believe in your product and your caliber to execute it, then refuse to settle for anything less than you actually need. This is the thumb rule: if you end up spending more time in managing your investors than your customers, than you got a wrong one. During the process if you feel it’s a task to manage a particular toxic investor then let it go, there are many more magical islands.
- What does your investor bring on board– Investors who can bring more than money are growth enablers. Look for investors who can also assist you with scaling & shaping your idea, and who can assist you with building vendor and customer relationships. Investors who ask tough questions and push you to think out of current scheme of idea is a great value addition to your management.
- Smart Investors – The famous quote “surround yourself with people who are smarter than you” fits well for investors as well.
“Chase the vision, not the money; the money will end up following you”