Choosing the right investor for your business or start-up isn’t an easy job. While you may be keen to raise money as quickly as possible, you must find the right investor (or even investors). The investor you choose can be the difference between success and failure. They can dictate huge business decisions, meaning that picking the right one is pivotal for the success of your business.
1. Understand what kind of investor you need
Knowing what level of funding you need at what time is key. It could be that you need an angel investor, to begin with or you are seeking venture capitalist investment. Whatever stage you’re out, you need to know what you’re looking for before you find the right partner.
2. Consider your motivators
When you choose an investor – at whatever stage – you’re choosing a person or people with a history and a personality. Consider their mindset if it’s an individual and assess whether or not you are compatible with the investor. You will spend a significant amount of time with an investor, so if you don’t believe you can build a positive working relationship with them, then they aren’t the right one.
3. Consider their current investments
Before wasting time and energy on an investor, consider what projects they are already invested in. After all, if they’re already stretched then it stands to reason that they will place a lot of pressure on your venture and be unable to provide further rounds of funding in the future. These conversations are vital to have before making an agreement.
4. Do your checks
Depending on the type of investor you choose, this could mean checking bankruptcy records or previous investment history. Basic background checks can be done online, but consider going deeper. You can check in with previous founders and CEOs who they may have worked with and consider going beyond just references. While investors traditionally do thorough checks into businesses, it’s less common the other way round, but it is important.
5. Avoid family and friends
While it may be tempting to offer family and friends the position of directors, it’s preferable to have no personal connections with investors. Personal connections are more likely to cause friction and will blur the lines between business and family life, and having a family member as an investor can cause a strain on the relationship.
6. Know where to look
To find the right investor for you, consider seeking out forums and sites that will put you in contact with private capitalists, angel investors, and larger venture capitals. So, while doing your research and exploring may seem like a lot of hard work, it will be worth it in the long run.
7. Get aligned
Ensure the investor you choose is aligned with your brand, bought into your vision, and onboard with your plans. If you aren’t, then you’ll face an uphill struggle. Make sure the people or person you choose is a good, trustworthy person that you’ll be glad to spend time with.