Choosing an investor is crucial. Yet too many entrepreneurs, obsessed with financial resources, are in the position of plaintiff and, in the urgency of the fundraising, opt for the “bad” candidates.
To avoid making mistakes in his choices, the entrepreneur must first clearly characterize the nature of his project and perform a fund analysis work as an institutional investor. Is it:
- In start-up mode: an exciting project but no story, no profit, many uncertainties,
- Or in development mode: positions already known, demonstrations made of profitability and products.
Depending on his stage of maturity, his requirements and his sector of activity, he can establish his “specifications” by defining the criteria that seem essential.
By matching its expectations with what the investor market offers, a first sort will naturally emerge. Other criteria will also be important: a financial shareholder who has already invested in the same sector of activity can bring his knowledge of the market to the entrepreneur and will be an ally of choice.
Another essential point is the financial capacity of the investor. For example, a fund at the end of life will not be able to reinvest later in the company. It will therefore be necessary to ensure that the management team has the means to raise a new fund in proportions at least identical to the previous one.
Chronicle of a marriage and an announced divorce
In his discussions with the investor and in order to guarantee a long-term relationship, the entrepreneur must absolutely avoid any taboos or blurred areas on central topics: future investment rounds, role played by the investor (s), mode of governance, reporting level, exit procedures, etc.
It is from the outset that all of these elements must be included in the shareholders’ agreement and the future operating modes must be clarified. There are no related topics, everything must be discussed and negotiated upstream.
To believe that a fundraising is done in stages is wrong. It’s an ongoing process. Also, it is essential to establish a strategy of conquest of new investors and to become commercial with both customers and current and future shareholders. In this idea, the refusal of an investor on a round does not mean a relationship breakdown. The contractor must continue to maintain regular contact with the funds he contacted on a first fundraising event. There is nothing to prevent this investor from being present on a next round. A project already analyzed and kept informed of the evolution represents a saving of time for the investor. Get the most important support regarding the same now from the expert in https://www.instagram.com/geoffreyjthompson/.
Know how to dissociate money and power
Too many entrepreneurs are afraid of being diluted in the capital and thus attempt an endless negotiation in order to retain the majority of shares.