Guest author Paul Greenman; Photo credit: Lia Cordery
The first thing you need if you want a fighting chance of getting noticed by an investor is a winning idea and theability to execute it. There are lots of really good ideas but few startups can build the teams to realize those ideas. Maybe this is not a comfortable statement but when you stand in front of the money this is a good departure point for your pitch – “we have the idea and the team”. Obviously you will also need to tick all the other usual boxes, but if review the How to section of this website you will be on the right track.
Finding the right contacts
Don’t be misled by their jeans and chucks – investors are still operating under the same old ‘laws of finance’.
The story is the same for a startup as it is for a 100 year old family company, you have to find the right investor focused on your sector. This is important for many reasons, but even more so because they understand the sector and will be able to offer more than capital. An investment by smart money is the ultimate proof of concept. But keep in mind, the best investor may not always be Google or an investment fund – say you have perfected a technical solution for optimising the purchase of feed stock for a biofuel operation, adding 2% to the bottom line in the process – industry leaders would jump at the chance to partner with you.
Despite the nature of tech being a disintermediation vehicle par excellence, I am partial to using intermediaries. A good advisor is constantly in the marketplace of ideas and capital, and drawing connections is their value added.
Knowing what they need and how to make the most of your relationship
It may sound straightforward, but people sometimes forget that investors first and foremost focus on the return on their investment pure and simple. Don’t be misled by their jeans and chucks – they are still operating under the same old “laws of finance”. It does not matter if the investor is a fund or company, they will view the opportunity to invest in a tried and tested process. Quality investors know what type of investments they are looking for, they are focused in certain areas, such as software security, SaaS, cloud storage etc. Obviously, as a founder you can find dumb money that takes a shotgun approach to investing but ultimately that will be a detour from which you may not recover. About the Author Paul is a “reformed” investment banker with twenty years experience in CEE. He has closed deals valued at over 700 million euros through his companies Navigator Finance and Wind Rose. Born in Minnesota, he studied in China and lives in Bratislava with his wife and newborn son. He has advised on the establishment of two accelerator funds and is currently originating investments for financial and industry investors in the startup and more traditional industries.
Founders have to figure out what are the right notes for their specific offering, and after establishing those, get the pitch right.
Once you have earned their interest, in order to make this into a productive relationship, one ingredient is key: trust. Founders trust the investor will support them, arrange quality mentors/advisors and help get them launched. Investors trust the founders will remain committed and rational when it comes to making tough decisions. Emotional maturity and a common understanding of the venture’s financial goals are also important.
Making it personal
There may be cases when personality issues deter investment talks – the team is ambitious but you simply don’t get along on a personal level. In most such instances I would suggest the founder walks, there are other options out there. You are going to be spending a great deal of time with the investors and you have to be able to communicate effectively or it will be hugely frustrating or it may simply go pear shaped. This is where emotional maturity can bridge the gap.