One of the toughest challenges about starting up a venture is funding, and often times that means taking on investors. And the type of investor you will want is a ride or die investor. This is an investor who understands the risks of a new business and will hang tough with the new company through thick and thin.
When you have to deal with so much as an entrepreneur, it always helps to know that your investors are willing to back you even through those phases and will not threaten to pull the plugs because of temporary blips in business performance, notes Abhishek Lal, CEO/co-founder of online media company VedSutra. Everything else aside, the investors primary focus should be to help you solve problems rather than to magnify them for you. You will be working with the investor through many milestones of your company and a ride or die investor is willing to support you as you navigate through the difficult phases. This is what makes him/her a true asset.
If you dont have a ride or die investor, your other investors could put your business in danger. A startup is not very liquid; most of the money is tied up in the business so when an investor wants to pull out, it can cause strain on a company just beginning to grow, explains investment adviser Jonathan J. Monjazi, founder/CEO of Monjazi Capital. Secondly, an investor in a startup should understand the risks and share the vision and goals of the company’s management. This means sticking with the investment even when things aren’t going the way one would hope.
So how does one attract a ride or die investor? The best way is through family. Its no surprise so many entrepreneurs get funded by their family first; families have a tendency to be ride or die, notes Monjazi. The next would be angel investors or crowdfunding. When speaking to anyone besides family, it is critical that investors believe in your vision and ability to execute. Investors should also know their role in your company, meaning do you want them to be an active investor telling you how to run your business or a passive investor? Either one is fine, but there needs to be an understanding of the roles.
Adds Lal, The best way by far to attract the right investor is using references from other entrepreneurs in your network who have gone through a similar process of finding investors earlier and might be able to give you specific inputs on each connection that they provide you.
Think out of the box when going after investors. I think the most underused method of attracting investors is the effective usage of LinkedIn. While platforms like AngelList and Kickstarter have gained popularity for enabling quick investor connections, LinkedIn continues to be the hotspot for developing long-term professional relationships, says Lal.
She continues, With sub-platforms like Pulse and SlideShare, LinkedIn gives entrepreneurs an opportunity to share the knowledge and insights that they gain about their industry with a wider audience. Most investors and industry professionals are always on the look-out for new insights in their focus industries and this sharing of insights by entrepreneurs can trigger interest and new connections from both seasoned and new investors alike. In addition, this process forces an automatic filtering of investors as only the ones who are willing to have a constructive discussion with you about those insights (even if they disagree with them) are actually likely to engage with you. The additional benefit here, is that these relationships are built outside of the fundraising context and are hence likely to be beneficial in more ways than just in pure financial terms.