Like with any new company, the goal is to become sustainable and profitable, but bootstrapping will only take you so far. I'm all for slow growth when proving traction, but once you've proved it, you have to strap your company to a rocket in order to succeed.
Startups today have a wide breadth of sources from where to get money, from family and friends and crowdfunding to investors with strategic capabilities. But it's important for startups not to chase investors just because they have money. Investors bring different capabilities and it's important for startups to be mindful of the folks they bring on board early.
Startup founders should vet investors (or accelerators) as diligently as they would a business partner, and they should understand exactly what they want and need from the partnership.
There is such a thing as bringing on an investor too early or attempting to scale your business too quickly, which can lead to making the wrong decisions or building the wrong strategy.
So how do you know when you're actually ready for an investment? One perspective is from Jordan Gaspar, Co-Founder and Managing Partner of AccelFoods, a food-focused accelerator.
As co-head of the early-stage investment platform, Jordan identifies innovative brands in the packaged food & beverage space, offering them capital, hands-on support from an operating team, and a suite of proprietary relationships and resources. Her advice: be extremely focused.
I should note that every accelerator and early stage investor is different, so part of an ongoing series, I'll ask a variety of investors what they look for.
At AccelFoods, Jordan looks to specific areas before making an investment:
1.Do you have a high quality product that investors believe in?
"Every product we consider tastes good and represents a standard of quality. We look for products where we are confident that trial will lead to repeat purchase behavior."
This is why proving early traction is so important, you want to work out the kinks and get a high quality product to an investor. Even if you're working with an MVP, it's important to be able to show what the dream is that they are buying in to.
2. Is there strong leadership?
Across the board, even for us as consultants, a strong leadership team is the difference between a great company and a failed on. We usually say that when a startup fails it is one of three things: marketing, leadership or tech.
According to Jordan, Accel looks to partner with entrepreneurs who have the qualities and drive they need to accelerate the growth of their business -- "passion, grit, intelligence and the ability to work well with and manage others."
3. Is your entrance to market at the right time?
"We look to invest in brands that compete in categories with attractive market dynamics. We evaluate everything from market size, growth and the competitive landscape, to commodity costs and consumer behavior."
In every case, timing is everything. From even a PR standpoint, your entrance to market matters! That is why social listening is so important (another article about that later).
4. Do you have a scalable brand?
"The company needs to be able to transition from being a niche offering for a specific set of consumers to being attractive to a wide swath of consumers." Jordan says. In her industry, they look for products that can transition from natural grocery store shelves to conventional consumer shopping carts.
5. Can you listen to feedback and embrace change?
A sign of a great leader is one who knows they are not good at everything. Growing a company is like flying a plane without visibility. You have to trust yourself, but also make sure you are listening to your team and advisors who have done this before - your "mission control" is everything. Are you willing to take feedback? Being collaborative with your investors and trusting their guidance and feedback, is a key trait for any successful entrepreneur.