Your company has the most chance of success if your expectations and vision are aligned with an investor. Just make sure you do your homework on them, says Suse Reynolds.
The first tip for finding the right investor is to be quite certain your company has reached the stage where it needs investment. “Investment readiness” means you should know precisely what the money will be used for.
Investors tend to feel most comfortable when their investment is being used to drive sales growth. Many investors will also provide capital for product development if your product is exciting enough with a genuinely addressable market.
Being “investment ready” also means you have your house in order. You have a clear business plan, tidy legals, tight financials and good governance in place.
If you don’t know precisely how you will deploy the capital and you are still grappling with a draft shareholders’ agreement or your financial records are a shambles, not only are you unlikely to find the right investor, you’re unlikely to find any investor at all.
If you are looking for angel investment be sure your company represents enticing ‘angel food’. Angels invest in high growth, IP-rich start-up companies producing products and services with the potential to disrupt and dominate global markets.
The absolute key to finding the right investor is ensuring your expectations are aligned. Do you share the same vision and how you’ll execute that vision? Be sure you both know what you want out of the relationship.
And it is a relationship. Do your own due diligence on any potential investor. What are they really like to work with? You are likely to be business partners for a number of years. Don’t use an angel investor if you don’t want to share the journey.
Don’t use an angel investor if you don’t have global aspirations. And don’t use an angel investor if you don’t have plans for a “king hit” liquidity event at some stage in the next 5 to 10 years.
Given the risk inherent in start up businesses, especially high growth ones, these need to be big rewards. Huge!
Angels like to get involved. They are genuinely interested in sharing their skills, networks, experience and passion. They invest for the buzz and enjoyment of giving back as much as for the prospect of a 10-30x return on their money.
So how do you actually meet the right investor? The reality is you need to network, network, network. Get out of the lab, the office, the garage, your own head space… just get out and go find him or her!
Suse Reynolds is Executive Director of Angel Association New Zealand and co-founder of Angel HQ, Wellington’s angel network.