6 Ways to Know an Investor Is the Right Fit for Your Company
Finding someone to support your business is about more than facts and figures on a term sheet.
Landing funding is one thing -- and deciding whether an investor is actually right for your brand is another. When it comes to finding an investor that is the right fit there are a number of things to keep in mind, including communication, reputation and commitment. To learn if an investor is right for your business, here are six tips from entrepreneurs themselves.
1. You don’t hate them.
“I ask myself what I call ‘the airport question.’ I imagine I’m stranded at the airport and my flight is delayed by three hours. If I saw this investor in the airport, would I walk right up to them and say, ‘Great, we get to spend some time together!’ or would I turn away and hope they didn’t notice me? If I can’t emphatically say it’s the former, they aren’t the right fit.” -- Patrick Quinlan, CEO, Convercent
2. Their references check out.
“I ask potential investors for an introduction to a portfolio company that isn’t a high performer or that has been challenging to support. Every early-stage investor, at some point, struggles with a company, because startups have big ups and downs. Do a reference check with the portfolio company's founder to understand their point of view on working with the investor. This will give you a greater understanding of the investor's support during contentious moments.” -- Milana Rabkin, co-founder and CEO, Stem
3. They see your strengths.
“The Riveter is a coworking space for women entrepreneurs. We’ve had a pretty obvious litmus test for investors this year, as I've been very pregnant with my third child. Some investors expressed pretty antiquated ideas of what it means to be a mother, and those sentiments were nonstarters in terms of moving forward. Outdated definitions don’t reflect our reality, which is that mothers are powerful leaders. We need to work with investors who walk the same line.” -- Amy Nelson, co-founder and CEO, The Riveter
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4. They communicate!
“I text them, usually something time-sensitive but not critical. If they respond quickly and are comfortable with this communication stream, then I know two things. First, they are interested and want to move to a more ‘direct’ conversation. Second, I will be able to keep them updated on business developments so our board meetings won’t be spent recapping. An unexpected thing happened recently: A VC texted me first! It made me want to accept her firm’s term sheet.” -- Gina Ashe, CEO, ThirdChannel
5. They’re curious.
“In more than one meeting, we walked through our launch strategy and business model, and the investors voiced their agreement. Things like ‘This makes a lot of sense’ and ‘I really like the approach’ came up over and over again, but there weren’t a lot of thoughtful questions. When we followed up, they did a complete 180 in terms of how they thought about our strategy. The lack of thoughtful questions was actually one giant red flag. Now we know.” -- Josh Wiesman, co-founder and CEO, Smilo
6. They do their homework.
“It’s essential that our investors consider health and wellness to be important. To ensure they truly get it when it comes to the need for healthier skincare options, I’ll ask about the products they use daily. This is pretty fun -- most of these investors are male and have never shared their skincare rituals with anyone. One investor took it super seriously and reported back that he tried tons of our products compared with conventional options -- he even tried on our lipsticks and compared them with his wife’s. Now that was commitment!” -- Tara Foley, founder, Follain
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