The relationship between start-up and investor is a special one. Investors provide much needed capital to young companies and, often, seasoned guidance toward their development. Choosing not only the right type of funding, but also the right financial partner is critical to success. But how do you know if you’ve found your financial soul-mate or a dud?
When assessing an investor, there are a few key lessons:
1. Do your homework
Before meeting with an investor, make sure you’ve done your research. This includes studying their background, what companies they’ve previously invested in, and how your company might fit into their portfolio. Doing this research not only helps you to understand if the investor is the right one for your business, but also demonstrates a level of respect and awareness the investor.
Not sure where to look? The internet is your friend. Besides looking at the investors’ websites, news, and interviews, LinkedIn, Twitter, Instagram and all the other social media sites can help you developed a more nuanced understanding of who you’re meeting with. . Finally, do yourself a favor and do a web search of the investors first and last name followed by “fraud.. Protect yourself.
2. Ask the right questions
When it comes time to actually meet your investor, you should have a comprehensive understanding of who they are and how you fit into their goals. However, your meeting with this person is a great chance to dive deeper into partnership, so be sure to prepare relevant questions. In fact, make a list beforehand to ensure you don’t forget anything on the spot. This meeting is a great chance to feel out the investor and get more information so be sure to ask about things like:
- Their motivation for investing (financial, altruistic, strategic...etc)
- Why they’ve chosen to invest in a specific industry or vertical
- Whether they’ve invested in companies like yours before
- What are their goals for investing
- How much capital they have and are interested in investing
- Their time frame for investing
- If they are the final decision maker or not
3. Approach investors with mutual respect
It probably goes without saying that you should show potential investors plenty of respect. But it’s also important to remember that assessing an investor is as much about making your company attractive to them as it is about figuring out if they’re the right match for your company. Taking on a financial partner is a large commitment and you want to be sure you do it right. Approach potential investors with mutual respect and curiosity and you’ll be on track to find your financial soul-mate!