Its a common conundrum for founders – if I give away equity for funding, who am I actually letting into my company.
Bringing in a growth partner – an investor most of the time – can mean good things for the company such as:
- Fresh perspective
- New energy and drive
- A new network
It’s undeniable that growth requires capital, but it also needs infrastructure and guidance as well. While these aren’t as tangible as money, good compatible and experienced partners will help you grow and avoid problems rather than cause them.
Here are 5 simple steps to getting funded
So the question is; How do you find the right type of money and partner?
There are numerous important factors to consider. We’re not delving into the types of contracts and explanations around there, we’ll have to leave that to later. Here are some steps to consider before bringing in potential investors:
Your vision should match their proposed strategy
Sounds easy, but it really isn’t. Startup founders are often a bit desperate for funding, but they should let it capital cloud their judgment.
To find the right partner, we recommend being upfront about your short- and long-term goals. Misleading an investor could cause issues further down the road, mistrust and long-drawn-out battles about the direction of the company.
The first part of the relationship usually revolves around getting the investor comfortable enough to invest. However, you need to be just as comfortable to accept his offer. Do your due diligence, and make sure both of your visions align.
Find out how Shark Tank makes entrepreneurs better
Get to know your partners
Learn your investor, just like they learn your company. Understand their successes and failures, and approach it like you would a friend or colleague. They are people as well.
Do your research, talk to other companies in their portfolio, including both the successes and the failures. The successful companies may not have great things to say about their investor or the failures may actually share the benefits of the investor’s involvement. It can give you direct insight into their style and vision.
Money isn’t the only thing to consider
Money is only part of the equation — guidance, contacts and local knowledge is also crucial. If relevant, make it clear that you’re looking for a mentor, and you may get a real partner.
Find out what Shirley Chua from Golden Equator Capital had to share about investment
Your investor may become your COO, CFO or even help you hire great people for your company if they are your real partners. It is important to look at any investment from angles beyond investment.
Be honest and straightforward
Before you can trust your investor, they should trust you. So resist the temptation to lie about your company, experience and anything else that you believe would help you gain that investment. It isn’t worth the trouble down the road.
Remember, once you violate trust, it is impossible to earn it back.
Partnering with someone who is compatible and brings value to your company, often requires being upfront about your strengths and more importantly, your weaknesses. It can be hard, but it’s not nearly as difficult as having to deal with a disgruntled partner.