Yes, fundraising may sound like it’s all about “funds” but, in reality, it is about more than that. While things like valuation, equity, and capital are essential in growing a big successful company, the founder-investor relationship plays a more important role than founders might think.
Here are a few essential things that founders need to look for in their VCs for a happy, long-term relationship that benefits both sides.
The quest for a non-greedy partner
Yes, you read that right. Getting a “partner” in your cap table is more important than just getting an “investor”. After all, you will be working together, ideally, for the success of your company.
One of the first things to look out for in a VC is their approach to equity. You want an investor who isn’t excessively greedy on the cap table. An equitable balance ensures that your interests as a founder remain aligned with those of your investors. It’s about finding that sweet spot where both parties feel they’re getting a fair deal, fostering a relationship built on mutual respect rather than just financial transactions.
Empathy in experience
A VC who has gone through the arduous process of raising their fund can be an invaluable ally. They’ve walked a mile in your shoes, understand the frustrations and challenges of fundraising, and can offer not just empathy but also practical advice and support.
Believe it or not, the power dynamics between investors and their LPs are pretty much the same as those between founders and investors. They know how hard it is to convince someone to trust them with their money so they will be more empathetic towards founders doing the same.
Find the smartest money for the best price
The adage of finding the “smartest money at the cheapest price” rings true in the VC world. But what constitutes ‘smart’ varies for each founder. It could mean access to specific markets, technological expertise, or strategic partnerships. Your task is to identify what you need most and find an investor who can bring that to the table.
At the same time, beware of “dumb money” – expensive investors who don’t bring anything to the table. By doing that, they might even slow you down and create a mess on your cap table in future rounds.
It’s all about building a healthy relationship
A healthy founder-VC relationship is rooted in transparency and trust. It’s about being able to share your “dirty laundry” with your investors. After all, they are part of your team. This openness ensures that both parties are working towards the same goals, even when facing challenges.
Being able to share your “dirty laundry” is essential because you won’t be able to hide them from investors forever. They need to know about what you’re going through and they need to support you if they can. And, you know what? They REALLY appreciate founders who share the downfalls with them because they are perfectly aware that no start-up journey is a straight line upward.
Separating your two brands
Understanding the distinction between your brand for fundraising and your brand for customers is crucial. While they are interconnected, each has different audiences and objectives.
When fundraising, think about investors whose brand can help you secure more rounds in the future. They do take a hard look at who’s investing in your current round and who has invested in previous rounds. If you have a strong investor brand in your cap table, it’s going to help you greatly.
Reevaluating the need for VC money
An important discussion point with potential VCs is understanding what you want to build. Sometimes, VC funding might not be the best route for your startup. Maybe bootstrapping or angel investing aligns better with your goals. It’s essential to evaluate all options and choose the path that best suits your vision and strategy.
In conclusion, finding the right VC is about much more than securing funds. It’s about partnering with someone who believes in your vision, shares your values, and is willing to roll up their sleeves and work alongside you. Remember, you’re not just choosing an investor; you’re choosing a partner for one of the most critical journeys of your professional life. Keep the conversation going, be clear about your needs and goals, and most importantly, seek a relationship that goes beyond the cash.
At Fortech Investments, we work with start-up founders as strategic partners, meaning that we offer added support beyond the capital that we invest. We provide founders with our own entrepreneurial networking, allowing them to connect with other founders, investors key players in their industries, potential clients, and all sorts of experts. If you’re an early-stage start-up in Healthcare, Manufacturing, Automotive, Fintech and Energy reach out to us here or at firstname.lastname@example.org