When raising capital, remember that you are not the only one that is “pitching”. Let’s assume you have an amazing product, targeted at a huge market, with profitable unit economics and a great team leading the company. . . you should have dozens of investors lined up waiting to give you a check. But it’s not just about the money.
Money is a commodity, a means of exchange. My money, just the money, is just as good or as bad as anyone else’s. But investors are not a commodity. There are many types and it is important to know what type of investor you are looking for in your company.
- Do you want an active investor or a passive investor?
- Do you want an investor that knows about your business and industry?
- Do you want an institutional investor that is going to ask you for detailed ongoing reports?
- Do you want deep pockets, someone who can keep participating in follow-on rounds?
- Do you want an investor who has to exit the company in a specific timeframe or do you want an investor who can stay in your company for the long term?
These are just some examples of questions you need to ask before starting to fundraise, because they will answer the most important question of all: who is the right investor for you, your company and its stakeholders at this point in time?
Once you have figured out the right investor for your needs, go out and find them. Just as investors try to find companies that best fit their needs, so should companies actively look for their ideal investor. And, just as investors conduct due diligence on companies, so too should the companies conduct due diligence on the investors. The best way to do this is by contacting the investor’s portfolio companies. They should be able to tell you if the investor is truly who they say they are and if they add value or not.
I genuinely believe there is no better or worse investor, generically. But I do believe there is a better or worse investor for you, for your company, at this moment in time.
When pitching your business to investors, remember that it should not be an interview, it should be more like a date. Both parties should be interchanging ideas and asking questions, in search for fit.
In DILA, when we are discussing and analyzing companies in our pipeline, we constantly ask ourselves: What value can we truly add to this company? How can we help them out? What do we know that can make them more valuable? Who do we know that can help them generate more long-term value? If we can’t answer these questions, we won’t invest. We believe it is not fair, nor in our interest. If there is smarter money than ours, that money should be entering the company.
Find your smart money, don’t settle for less.