Innovation is a labor of love. A lot of work goes into taking an idea and turning it into a solid product or service.
Startups are not for the faint at heart. To make a significant entry into your target market requires funding: you will need to find investors that believe in your concept.
Conferences and trade fairs make for great opportunities to network with industry titans. The goal is to make an impression at such events. To achieve this, invest in a set up that stands out.
A great tip is to research the venue ahead of time and familiarize yourself with the city. This way, if you find yourself needing a customized trade show booth in Las Vegas, you know where to go. It will free up your time to work on your presentation skills.
So, when investors finally start knocking on your door, how do you choose?
Before you sign that deal, here are 5 qualities to consider when choosing a suitable investor.
1] Fair Contractual terms
Before you make any commitments all parties ought to negotiate and agree on terms. Contracts are important because they make everything you agreed on, legally binding.
It is wise to engage a legal professional in this process. Make a definitive list of what you would like from the investor and go through it with them.
It will give your lawyer guidance on what kind of deal you require them to help you negotiate. Having legal counsel also ensures you do not miss out on any contractual fine print that does not work in your favor.
The need for funding has in many cases led to startups signing unfairly skewed contracts. While reasonable contractual terms involve compromise, they should not be punitive or exploitative to your business. Be wary of the predatory investor and be willing to walk away when the fit is not right.
2] Brand alignment
When you take on investors, they become part of your brand. A brand is what sets you apart from all your competitors. It is the image that your business projects to society and should be zealously guarded.
One of the major aspects of branding is value systems. Basic qualities such as integrity are indispensable. Association with outlawed gangs, discriminatory groups, or individuals with checkered reputations, call your values to question.
They may be the kiss of death for your young enterprise. An example of this is the blood diamond scandal that brought jewelry dealers into terrible disrepute.
In view of this, perform due diligence on entities you associate with and their value systems. Carefully evaluate the legality of their financial standing.
Any funds they invest with you may result in your transactions being subject to investigation and prosecution. Consider their social media profile too. It is better to be cautious than suffer harsh consequences later.
3] Conducive Workplace culture
Investors vary; some are silent while others are active partners. In a silent partnership, you only interact with your partner financially. On the contrary, with an active partner, you tend to have a more involved work dynamic. Factors such as dress code, working hours, perks, and hiring processes form a culture.
Some work environments have strict rules and schedules cast in stone. Others, pride themselves in relaxed work settings. Successful companies such as Google and Facebook have demonstrated that adaptive workplace policies can yield great results. Productivity is higher when staff members are motivated and allowed flexibility,
So, do you want to be the next Google? Find out what work relations your investor expects. Having opposing cultures and not meeting each other’s expectations may result in conflict.
Further, the effects of such discord will have a negative impact on your success journey.
4] Non-monetary Support
As the name suggests, startups are new ventures. Even in the event that you have run a business before, it was probably in a different industry. Every industry has its own unique risks, challenges, and market trends.
But, big names aside, their networks in the business community could change the entire trajectory of your business. When it comes to requirements such as permits and patents, they have done it all before. It will ease the processes for you.
Experience is a treasure trove of information. Choose an investor whose wisdom you can learn from. When you have a skilled hand to guide you, it enables you to stay on course by affirming or correcting your decisions. In an ideal situation, you would have a symbiotic mentorship relationship.
5] Future Plans
The phrase, ‘acquihire’, was coined to describe an emerging business trend. It is the acquisition of a startup by a larger corporation that does not plan on further growing the concept.
They buy it to have access to the talent pool or cut off competition. If your desire is for your startup to grow into a formidable corporate entity, the investor needs to share your vision.
In addition, seek clarity where possible on exit strategies. Think of it as you would a prenuptial agreement. In the event that your work relations fall apart or the business does not bear fruit, how will you part ways? Who will own the intellectual property of the enterprise?
We can hardly tell with certainty what lies ahead, but it is wise to plan for eventualities.
A lot has been said about how startups should position themselves and attract investors. Given as you are the one in need, it often feels like you do not have as much bargaining power.
The proverbial beggar, they say, does not have the luxury of being choosy. But what you have to offer has value and therein lies your leverage.
Patience and discernment will serve you well in making your decision. Learn from the mistakes of those that have done it before you. Read and consult widely, your life’s work is at stake here. These efforts could make the difference between failure to launch and exponential success.