If you’re looking to raise money to launch your startup or accelerate the growth of your business, choosing the right investment partner is one of the most important decisions you will make.
While any investor can provide financial backing, the right one can offer so much more. Aligning with the wrong partner can lead to conflict and disruption, but if you get it right, they can be truly transformative.
These eight essential steps will help you identify and secure the ideal investment partner for you and your company.
1. Figure out what you need
First things first, you need to be clear on how much funding you need, the stage of your company, and what else you’re looking for in addition to capital.
Some good questions to start with are:
- Do you have an idea of the value of your business?
- How did you get to this value, and did you get an independent opinion?
- How much capital are you looking to raise?
- How much equity are you prepared to part with?
- Do you want a hands-on or hands-off partner?
- What other value-add are you hoping the investor can bring besides funds?
2. Consider your options
Once you’re clear on what you need, this will help you zero in on the correct type of investor:
- Angel investors invest smaller amounts in earlier-stage startups and can often be more opportunistic.
- Venture capitalists invest more significant amounts in high-growth potential startups, from the seed stage to later rounds.
- Private equity usually focuses on more established businesses for growth funding or buyouts.
- Family offices often have flexible investment mandates and can provide patient (more long-term) capital.
- Corporate investors may offer strategic value alongside funding, particularly in relevant industries. They will often focus on seeking strategic benefits rather than purely financial returns.
They each have unique benefits but have different expectations regarding control, return on investment, and time horizon. Not all will be available to you. Select the type that best aligns with your long-term goals and your business’ needs.
3. Conduct thorough research
Invest time in researching potential investors so you speak to the right people. Depending on the stage, this might involve utilising online platforms such as AngelList, Crunchbase, and PitchBook to identify and analyse investors. It might also involve working with an advisor or intermediary.
I would recommend attending industry conferences and networking events to make valuable connections. Leverage your professional network for suggestions and learn from others who have walked the same path.
4. Do your homework
Just as investors will evaluate you, it’s important to thoroughly research potential investors once you’ve built a shortlist.
Start by speaking to people they’ve invested in. Learn about the investor’s reputation and expertise in the market. Look into their investment history and portfolio to understand how they think, make decisions, and manage their investments.
It is a good idea to reach out to founders of companies in which the investor has previously invested so that you can gauge their experience working with the investor. Crucially, you shouldn’t limit yourself to speaking only with the businesses the investor suggests. Instead, ask to be connected with the ones you select, including some investments that didn’t go well. Also, try to speak to people who have worked with the investor in the past but don’t have current relationships. These individuals are more likely to give you candid feedback.
Research the investor’s standing in the industry and their ability to add value beyond just providing capital. It’s helpful to seek out investors with relevant experience in your sector, as these funders will understand the unique challenges and opportunities in your industry and can offer valuable advice, connections, and strategic insights beyond just financial backing.
You should also seek to understand the makeup of the investors’ wider portfolio, which will indicate how experienced they are in supporting companies like yours and flag any potential conflicts of interest.
Finally, for family offices, take time to understand their investment philosophy and long-term goals. Their motivations often differ from traditional investors, so knowing their strategy will help you determine whether they align with your company’s vision.
5. Prepare
Craft a clear and persuasive sales document that highlights your company’s potential. Depending on the stage of your business, this could be a pitch deck or an information memorandum.
Clearly articulate your value proposition, market opportunity, and growth strategy, and be prepared to answer detailed questions about your business model, financials, and competitive landscape. Ideally, tailor your pitch to address each potential investor’s specific interests and investment criteria.
6. Leverage warm introductions and network connections
For earlier-stage investments, it can help to get introductions to investors through mutual connections. There is more risk for the investor and less for them to review, so a warm referral goes a long way.
Use LinkedIn to identify connections that are shared with target investors. Engage with accelerators or incubators that can facilitate investor introductions. For family offices and corporate investors, industry events and specialised networks can be particularly valuable for making initial connections, while corporate financial advisors can help more established companies with introductions.
7. Negotiate and align expectations
Once you’ve identified potential investors, carefully negotiate terms and ensure mutual understanding. Be clear about your views on valuation and the equity stake you’re willing to offer.
Discuss board seats, voting rights, and any specific milestones or expectations. Ensure alignment on the long-term vision for the company and potential exit strategies. For family offices, be prepared to discuss longer investment horizons and strategic considerations beyond financial returns.
8. Assess the personal relationship
Investment partnerships go beyond finances – they’re long-term relationships. You’ll be working closely with these people through ups and downs, so it’s crucial to have good chemistry. Make sure you like and trust them, as they’ll hopefully be offering more than just money – they’ll guide, advise and support you.
Equally important are shared values. Misaligned priorities can lead to conflicts in key decisions, so ensure they respect your vision and culture. Trust your instincts – if something feels off now, it’s likely to cause bigger problems later.
Michael Goodwin is co-founder at boutique recruitment investors, Jigsaw Equity
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