through a results-driven approach that produces success .
The following can help get your company on the right track .
Plan
You know your company better than anyone , but don ’ t expect investors to immediately agree with your viewpoints . Be ready to convince investors through data-driven evidence without overselling your idea because , well , it ’ s your idea . Most investors — including angels , venture capitalists , private equity firms and corporate sponsors — review and hear from tons of founders and startups each year . They ’ ve heard it all , likely have an investment thesis and may rely on limited partner-backed funds that are specifically tailored to a market in which your company fits . But that doesn ’ t guarantee they ’ ll see the brilliance of your approach .
Before reaching out to investor groups , ensure you ’ ve vetted your own company with independent analysis . Pitch at startup events , take advantage of “ office hours ” and advisory opportunities with incubators and accelerators , proactively solicit constructive feedback and criticism from other founders and startups working in corollary markets — although you may want to consider utilizing simple nondisclosure agreements to limit concerns over idea theft .
If , after doing the above , you feel you ’ ve addressed ( or can address ) nearly any question , concern , or recommendation levied at your startup with factual , data-backed responses that fundamentally support your startup ’ s central thesis , you ’ re ready to speak with investors .
Prepare
Once you ’ ve fine-tuned your company ’ s pitch to the point of perfection , carefully prepare for your specific investor audience . Hint : They ’ re not all the same ! The motivations of an individual accredited angel investor from your hometown are not the same as those of a regional accelerator offering seed
Before asking someone to write you a check , know who they are , who they ’ ve invested in previously and what their expectations are for your startup .
capital on a convertible note basis , which further vary from a venture capitalist purchasing a majority shareholder stake and seeking aggressive returns on a 3-4 year basis . Before asking someone to write you a check , know who they are , who they ’ ve invested in previously and what their expectations are for your startup . Receiving investment is a noble end goal , but misaligned expectations often result in strained relationships that can actually drag down a company ’ s operations and inhibit future growth .
Beyond the “ who ,” ensure you have at least a foundational understanding of the “ what .” When you approach investors , you should have a clear understanding of what you ’ re asking for ( for example , raising $ 500,000 on convertible notes to support initial development of a core product versus raising $ 3 million in working capital to massively scale operations in new market territories ). What are your terms of investment ? Do they align with a defensible valuation of your company ? Do they fit within the broader value proposition you ’ re pitching while adequately accounting for unknowns ? Is the capital raise well tailored to your stated objectives , and will those objectives result in acceptable returns for your investors ?
The point is , don ’ t ask for money if you ’ re not prepared to answer tough questions from investors . Although good investors will work with you to develop cohesive growth strategies and provide plenty of advisory support , they ’ ll want to know you ’ re deeply committed to the company ’ s success and have prepared for receipt of investment funds by expertising yourself ( and your company ) on what it will take to succeed .
Produce
You ’ ve built a company from the ground up . No one knows your startup better than you , and you ’ ve found a valuable investor audience that believes in your vision and is willing to back it with capital and advisory support . If you ’ ve made it this far , you know the road to success isn ’ t over — it ’ s just beginning . It will take significant effort to maximize growth while remaining compliant and avoiding classic pitfalls like cofounder disputes , employment and labor law concerns , intellectual property theft or dilution , and overzealous spending habits .
Don ’ t forget , you ’ re spending someone else ’ s money — they ’ ll expect transparency and accountability . If you believe in your startup and think others should too , plan , prepare and produce .
Jan Roos is a licensed business attorney providing growth-oriented legal support to California companies , including investment and acquisition work . He can be found somewhere between Lake Tahoe and the California coast .
How did you prepare to approach investors for your startup ?
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