Your investment decisions have the power to crush your dreams, or they may help you break down multiple barriers on your way to realizing your full potential. When you bring on a new investor, that institution or person becomes a part of your cap table for the long haul. Divorcing your wife or husband is commonly recognized as being much quicker than divorcing your investor. You will be extremely careful when finding an investor.
When looking for and selecting investors to participate in your next round of fundraising, keep the following points in your mind.
The right type of investor
Checking for the proper amount of investors for your startup is one of the most fundamental tasks. Everyone wants a piece of the VC pie. However, you’ll almost certainly need to be holding angel investors and friends and family funding rounds before you get there.
See Also: What Are Equity Investments In The Startup Ecosystem?
Ability to Fund
For entrepreneurs, raising funds is enough for a direction. You don’t want to waste any more time squandering it on people who don’t have the financial means to contribute. If the investor is having financial difficulties, that individual will be under a lot of stress. It is much better if they have connections to wealthy people.
Reputation for Investing in Multiple Rounds
Recruiting new investors for each round is costly and time-consuming. It also dilutes your ownership, making your company less appealing to potential investors in the future. Reduce these concerns by finding investors already committed to participating in future investment rounds.
Do you want to be a lead investor?
The lead investor sets the terms of your funding round, with everyone else investing on the same terms. To be deemed lead investors, they would have to contribute more than 15% of the total funding raised. Having a good lead investor should generate a lot of interest from other investors.
Appropriate for Your Company’s Brand and Culture
Think about how well this investor will fit into your brand and company culture. There’s a good chance they’ll be on your board of directors and make a lot of decisions about your brand and workplace. People will immediately link your brand with their own.
Intention & Control
Do they have faith in the mission and you as the essential player in bringing it to fruition? Will they allow you to work at your best? Or will they try to damage your reputation and find ways to force you out of your own business?
Who you pick as investors is critical to your success. It will make or break you. These factors can be part of an essential checklist for vetting potential investors in your startup.