Finding and approaching the first investors for your company can be a frustrating task. Most start-up founders can be faced with so many questions: How to identify the right investors? How to approach them? How to evaluate the investors’ roles in their companies? In this post, Emakase will provide you with some tips on how to communicate with the right investors, as well as how to evaluate and maintain great relationships with them. Please read on to find out!
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Finding and approaching the first investors for your company can be a frustrating task. Most start-up founders can be faced with so many questions: How to identify the right investors? How to approach them? How to evaluate the investors’ roles in their companies?
In this post, Emakase will provide you with some tips on how to communicate with the right investors, as well as how to evaluate and maintain great relationships with them. Please read on to find out!
[𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐲 𝐭𝐡𝐞 𝐫𝐢𝐠𝐡𝐭 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬]
Before trying to approach any investors, the first thing we need to do is identify whom we should approach. Investors can be classified into two types:
- Smart-money investors are those who not only provide start-ups with money to run their businesses but also expertise and strategy advice when needed. These investors also value sustainable growth of businesses and thus would stay longer with companies to boost their profits to be the highest possible.
- Trend investors are those who make their investment decisions based on current trends in the market, Limited Partners’ preferences or hot performance metrics of companies. They often purchase shares when prices are low and time their exits so that they can get out at the time when they can enjoy maximum returns.
Executives are advised to make a list of at most 15-20 investors that have professionals specializing in their companies’ fields to approach. Before attending any potential investment networking events, executives should also review the guest lists to see if there are any investors worth talking to rather than spend too much time communicating with investors that don’t really matter.
[𝐅𝐢𝐧𝐝 𝐚 𝐰𝐚𝐫𝐦 𝐰𝐚𝐲 𝐢𝐧]
After finalizing your list of target investors, the next step is to approach them. If this is your first time finding investors, it is likely you don’t have any existing relationships. Therefore, it is better to have a proper introduction. You should find a mutual relationship with your target investor and ask that person to provide a warm referral. The chances of getting a response would improve substantially as a result.
However, if you have done much research about an investor and think that your proposal may interest him/her, a cold call or an email may not be a bad idea.
[𝐆𝐞𝐭 𝐭𝐡𝐢𝐫𝐝-𝐩𝐚𝐫𝐭𝐲 𝐟𝐞𝐞𝐝𝐛𝐚𝐜𝐤]
Before you decide to approach or work with any investors, it is also advisable that you should also get third-party views on what those investors are like to work with. Do they tend to be active or inactive? Is their involvement a big help for the company or a mere distraction? Do they understand the risk of investment? Talking to other executives who have had the chance to work with these investors, or simply doing some online research and reading their social media feeds can give you a clearer picture of your target investors.
[𝐒𝐞𝐞 𝐡𝐨𝐰 𝐭𝐡𝐞 𝐫𝐞𝐥𝐚𝐭𝐢𝐨𝐧𝐬𝐡𝐢𝐩 𝐞𝐯𝐨𝐥𝐯𝐞𝐬]
If the first meeting goes well or really well, you probably will have multiple meetings coming up. What you should remember is that through these meetings, investors will try to evaluate whether or not you and your company have what it takes to execute your vision. Therefore, be consistent and put on your best performance, delivering what investors expect based on your research about them. But also remember that the relationship between you and investors is a win-win relationship. Therefore, these meetings are also times for you to evaluate your investors to see if they are really who you and your team want to work with. It is advisable that executives focus on communicating with and asking questions for investors to better understand them. At the end of the day, we all want to work with people who are supportive and helpful.
