When working with investors, there are some clear Do's and Don'ts. Beyond that, there are also some pretty awkward "Doozies", situations where even the experts are split on how to handle things. This makes running an entrepreneurial company so challenging. However if it was all so easy, there would be a simple guidebook where we could look everything up!
- Have a snappy elevator speech
- But... still be able to describe your company in one quick sentence
- Make sure your market claim is important, simple, and totally defendable
- Understand and appreciate the difference between angels, strategic investors, private equity, venture capital, and debt vs. equity
- Start with a manageable-size investor target list. Don't use a generic list of investors. One size does not fit all!
- Know what each particular VC is looking for. [Be able to explain why they in particular would be interested.]
- Circle in on the key individual in the fund that leads your particular sector.
- Count on getting through to less than the investors you aim to, then being able to go forward with less than of those.
- Evolve your list and your presentation weekly
- Appear confident, but never cocky. [Though it helps to be truly active in discussions with other investors.]
- Make your success dependent on one particular investor
- Build your whole business plan around that one giant customer prospect
- Use clich references, or hyberbole, such as: First mover advantage, Doing an IPO, All we need is 2% of the market, Proprietary assets, Most experienced team, or like, biggest, greatest, most powerful.]
- Formalize your deal structure when you don't even have a lead investor who has described what they expect
- Expect VC's to invest like angels
- Rely on canned demos [You need to show the real product. Try using GoToMeeting.]
- Rush your investors or throw out a nave deadline date. [Telling them you expect to close in 3 weeks is a sure way to kill a deal. Their interest level will dictate timing.]
- Discuss progress you're making with other investors. This could backfire if they ask to talk with your other prospects. [You might think it prods investors to know you have other options, but be careful with this. Never, ever make stuff up.]
- Showing your emotional highs & lows. [Having daily roller-coaster experiences is a way of life for a fast-growth innovation entrepreneur. So, having enthusiasm and passion is great, but showing bipolar tendencies is not good. Try not to cross that line.]
- Eagerly following-up. Always try to bring some news about something good on each new contact. [When to call back? Too much? Too fast? Persistence is generally good, but the best motivation is a truly appetizing business opportunity.]
- Open up about your problems and fears. [It is good to develop investor trust, but you are not looking for sympathy. Showing the challenges that face you is healthy, but you must also show your strength and ability to overcome obstacles.]
- Provide deep details on investor discussions to your staff. [I have seen great leaders on both sides of this. First and foremost, don't blow the deal by sharing too much with too large of a group. However, do keep your people informed so they feel engaged as fellow team members.]
- Discuss plans with investors about future fundings. [The best investor relationships are built on opportunity and trust. Smart investors will see themselves as your long-term partners, thus your futures are aligned.]