I have written a lot in previous posts about things startups can do to turn a "No" into a "Yes" from investors. However, just because an investor wants to give you money, doesn't mean you need to automatically take it. Some investors are more valuable than others and can provide you with extra help to accelerate your company. Let's take a look at some of the things value-add investors can bring to the table and how you can better identify them.
Get a Partner Not a Check
A lot of startups view fundraising as a transaction. They get a check for money they desperately need, and in return they give up a portion of equity in their company. Although, some startups are ok with this relationship, in my opinion, these are not good investors. A good investor adds value to your business, as in they help you grow your business faster with the capital than you could otherwise. For example, let's say you got $1M for your business and could use that to add another $2M in extra value on your own. A value-add investor could take that same $1M and get an extra $3M-$4M in business value. When trying to figure out if you have a value-add investor always ask yourself: "Will this investor help me grow my business quicker than I can on my own?" If the answer is "Yes" than you have a value-add investor, if not, it may be worthwhile to look elsewhere for your capital.
Now that we understand what a value-add investor is, let's take a look at some of things they can actually do to bring value to the table. First and foremost, a value-add investor can increase your sales through introductions to potential customers. Many startups rely on networking and connections to sell to early customers, so having an investor help you get your foot in the door can go a long way. Good investors might also be able to help you in bringing on top talent like a great salesperson or developer. An investor that works with a lot of startups know people that might be a good fit for your company and could entice them to work for you. A value-add investor will know your strengths and weaknesses and can help you fill in the missing piece to your team. Lastly, a value-add investor can give you the connections you need for future rounds of fundraising. Investors with successful exits will have connections with the funds that invested in their previous portfolio companies. Having an investor with these relationships can be very beneficial to you if you ever need to raise more capital down the road.
Summary
Not all money is equal, when possible prioritize getting a value-add investor. A good investor will help you get talent, customers, or more money. It's important to get a partnership and not just a check. Anyone can give you money, but not everyone will help your business grow. If you are having trouble identifying value-add investors, reach out to us at InfleXion Point. We are happy to help!
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