Idealog: What are New Zealand investors looking for in companies, and what motivates them to invest?

Suse Reynolds: Every investor is different of course but most will have somewhere in their top three something along the lines of:

1. A super compelling founder and team. A founder who has a chip on their shoulder, an itch they absolutely have to scratch and who can answer the question “why them?” and the response sparkles from their eyes and generates energy that comes from their absolute core. A great founder gives you a sense they are completely committed to the mission underpinning their venture and that they recognise that the purpose underlying it is bigger than them. They are smart, driven, and great listeners who respond quickly to enquiries and are highly empathetic. They fervently believe they can have an creative, social and financial impact in a way that gives them, their customers, stakeholders and investors a unique opportunity to be part of that belief and exponential value creation.
2. A really exciting, potentially disruptive idea for a product or service with a really meaningful market. A market that will utterly love the product or service. And a market which contains a mega ton of people willing to pay for that product or service and which is big enough to generate exponential returns for investors and acquirers – not just financially but for people and the planet too. This is the ‘product/market fit’ component and answers the questions “why this?”.
3. Finally the company/founder understands why this is the perfect time to be bringing this product or service to the world. This is the answer to the “why now?” question. It’s all about understanding what is going on in markets, value chains, consumer preferences to make the timing right for this company to fire. Where does what you’re building land on the relevant Gartner Hype Curve?

How do you find the investor that’s right for you? What’s some tips on how to ensure it’s a good alignment between a founder and a potential investor? 

Fundamentally this is about being really clear about what it is you want to buy with the investment you are seeking and who can best help you get it. It’s so not all about the money! Look for an investor who can help you crack a market channel, develop your product faster, has experience scaling companies, can help with the next capital raise and who will inspire and support you.

I heard a great expression the other day which also answers this question … “know your labrador!” Be sure you and your investor not only share what success looks like and how you plan to get there but that you also mutually understand what motivates both of you. Some labradors love food, some love their soft toy, some love a walk. Some founders and investors are motivated by changing the world, some of love caning milestones, some love inspiring a team, some love making money, some get a buzz from public accolades.

To get a good sense of each other, do not rush duediligence (DD). And do it well; cover all the bases with the best insights you can garner. Spend time together socially and professionally. It should take at least six weeks and for bigger deals, it can take up to three months to complete DD.

What do you wish founders would understand more about investors and the experience they go through in investing in a company? What about the reverse – where could investors be more understanding on the founder front?

You are both want to create and be part of something that is super successful and super success comes with high octane emotions. Lead investors put themselves out there too… they stake their reputation to your success. And if they are angel investors, they are investing their own hard earned coin so the personal attachment is arguably even greater than for those who act for a VC fund. But they also buy in emotionally too.

On the other side, investors should never under estimate how lonely, terrifying and exhausting it is being a founder. The weight of responsibility felt for the endeavour and the venture, for employees and to investors is not lightly held and at times can feel crushing. So you must support each other, be kind to each other and be generously honest with each other.

What needs to change with the number of start-ups seeking investment in New Zealand? How do we truly scale up?

First, we must absolutely believe that we can create globally impactful businesses. More ambition to address massive markets would not go amiss. And we would do better if we had clearer definitions of what success looks like at the very outset. If you want to create a billion dollar company, get clear on who is going to help you do this, the steps to get there and how much money you’ll need to do it. Exiting your venture for $20m or $100m in 4 to 10 years is also a worthy ambition. Generating this sort of value is a totally credible path to creating a billion dollar company as you, and we as an ecosystem, gather experience and intel on how to scale and create world changing businesses.

What do New Zealand companies do well in terms of pitching, and where is there room for improvement?

See above! More belief, more preparation, more asking for help, more genuineness and sincerity and more ambition.

Look out for part two, coming next week.