One day, you\u2019re walking to the shop to pick up some ingredients for dinner, when suddenly, out of nowhere, you come up with an idea. Not just any idea, but an idea that will revolutionise walking. Or shopping. Or whatever, it doesn\u2019t matter \u2013 as long as you can build a small business or startup around it.<\/p>\n
You\u2019re not the type to just dream aimlessly, so you develop your idea. You write out a business plan, build a website, start building a marketing network around your contacts, and your startup begins to gather momentum.<\/p>\n
But now, you need money. And not just money, you need an investor \u2013 somebody who funds your current growth and can also help you steer through the unpredictable future.<\/p>\n
Going on the market for funding is always exciting, but it can be overwhelming. Here\u2019s a quick guide to finding the right investor for your company.<\/p>\n
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Once you\u2019re on the market, ask yourself: why do you need an investor at this moment? Do you need<\/em> one \u2013 or do you just want<\/em> one? Often, startups try to justify their need for funding by saying that they need more employees, or they need a bigger marketing budget. But really, they just want the validation that an investor brings.<\/p>\n And that\u2019s ok, but now is the time to push your company to grow and thrive with what you have already. That\u2019s the benefit of being small \u2013 you can be flexible and adapt rapidly. Once you have funding, you lose that.<\/p>\n Be honest with yourself about why you\u2019re looking for funding and seek new ways to operate on your existing budget, while continuing to thrive. Bootstrapping like this drives up your value in the long run.<\/p>\n That\u2019s because it\u2019s best to:<\/p>\n \u00a0<\/p>\n Again, once you\u2019re on the market, it\u2019s only natural to feel impatient. Before funding, it can be hard to know exactly how much your company is worth unless you’ve done a 409A Valuation. Your first investor assigns you a value \u2013 they make it black and white to the world that your dream is important, and worth something.<\/p>\n And that\u2019s great, but it tempts you to rush headlong into an agreement with the first flattering investor.<\/p>\n The longer you are successful on your own, the stronger your negotiating position in the market is. By taking your time, you show potential investors that you want <\/em>their money, you don\u2019t need <\/em>it.<\/p>\n And there\u2019s another benefit: taking your time allows you to take a further look at who the investor is:<\/p>\n \u00a0<\/p>\n Somebody once described the relationship between a startup and its investors as marriage, without any intimacy to save you in case of divorce. You might think you need the money now, but in a few years, when it comes time to do another round of funding, you and your investor are going to be making decisions together. It\u2019s important that you know you\u2019re on the same page.<\/p>\n Take a careful look at the proposals. Walk through your capitalization table, and imagine what it looks like at the next round. Imagine your first investor\u2019s proposal as a foundation, and see how your capitalization table starts to take shape.<\/p>\nTake your time<\/h2>\n
Do your due diligence<\/h2>\n