It's often tempting to just take whatever you can get when you are in fundraising mode. But the reality is that a $25,000 investment from a value-add investor could make more of a difference to your success than a $100,000 investment from a completely passive backer.
While venture capitalists can provide more than just capital, don't underestimate the value that individual angel investors can also deliver. In fact, one of the main reasons companies raise capital online is to combine value-add angel investors with larger, institutional investors such as venture funds. Entrepreneurs who leverage online investing platforms such as SeedInvest are able to tap into large networks of angel investors, so the chances are high that they will find hundreds of potential investors who have deep domain expertise and connections in their particular vertical.
Regardless of whether you choose to raise online, developing a gameplan upfront for identifying the right investors will go a long way. There are five areas that you should consider when hunting for your ideal unicorn investor:
1. Industry Connections
Getting a few highly connected angel investors in your corner can really move the needle. Introductions to potential customers, distributors and partners can help your company scale faster and get you in front of people who would have otherwise been very hard to reach.
2. Domain Expertise
Senior people in your industry can provide valuable mentoring, advice and feedback. Given their experience, they can provide useful input which can help you refine your product, marketing and growth strategies. The best entrepreneurs know what they don't know and angel investors can help fill those gaps.
3. Professional Experience
Experienced business professionals who are not in your industry can still add significant value. Seasoned entrepreneurs and executives can serve as a valuable sounding board and have probably already faced a lot of the same challenges you will undoubtedly face as you grow.
4. Brand Recognition
Getting well-known investors into your round can equate to priceless brand name association. For example, investors such as Mark Cuban, Peter Thiel and Richard Branson have invested in companies that have raised capital on SeedInvest, and their involvement has significantly enhanced the profile of those businesses.
5. Dry Powder
Unless you are the rare exception, it's probably going to take your startup a handful of funding rounds to scale and get to profitability. As a result, it's valuable to land some investors who have the ability to write follow-on checks into later rounds. Having one or two deep-pocketed investors will provide flexibility when you need to go back to the well.
Over the last three years, we've found one key similarity among companies who were successful in landing value-add investors. Companies who aren't afraid to get themselves out there broadly maximize their chances of finding that unicorn investor. At the end of the day, all capital is not created equal and those who successfully land strategic investors will find themselves collecting dividends in the long-run.