Tying The Knot with Investors: How to Find the Perfect Fit
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Choosing your early-stage investors is akin to choosing the person you’re going to marry. You’re going to spend years in a business relationship with your investors, so you have to find someone you’re excited to partner with long-term. Conversely, you also have to convince potential investors that your company is worth their time and money.
Sequoia Capital Partner Jess Lee and Pilot Co-Founder and CEO Waseem Daher broke down how to ease the process of early fundraising, what to look for in a potential investor, and how to pitch your company well in a recent webinar on how to get your first investor to say “yes.”
Don’t Wait for the Perfect-Fit Investor
While your investors should be compatible with your goals and vision, you may not be able to realistically find an ideal investor.
You're not going to find someone who's perfect, just like you cannot find the perfect spouse who has all of the qualities and attributes that you’ve always dreamed of finding in your significant other. You need to have standards and requirements for your investors, but you can’t expect to find a plethora of perfect candidates.
“You need to pick and prioritize which of these things matter the most,” Jess said. “If you can get one of them that's a great fit, three of them that are pretty good fit, still that's great.”
Finding the right investor doesn’t mean waiting for a perfect match. You just have to figure out which investor traits are most important to you and prioritize them.
Sell The Problem Your Business is Solving
Starting your own business is a bit like climbing a mountain. You’re working as hard as you can just to get your team to the top, but investors aren’t climbing just one mountain; they’re looking at a whole mountain range and trying to decide which mountain is worth climbing.
“You’re thinking, how do I make it up the mountain? Am I beating the other teams?” Jess said. “The VC is thinking, is this a good mountain? How does this mountain compare to others?”
If you want investors to partner with your business, convince them to join your climbing expedition by selling the problem you’re solving.
“You should just understand that selling your mountain as a good one to climb in the first place is an extremely important part of the pitch,” Jess said. “And it's not just the TAM; it's also sometimes the market structure and the business model.”
Show potential investors your market, why it’s interesting, and why it’s a good problem to solve. It might just convince them to climb that mountain with you.
Think Like an Investor
When you’re building your startup, it’s easy to constantly focus on what may happen in the short-term. You may be worried about what’s going to happen with your company over the week, month, or year, but investors have a much bigger picture in mind.
“You’re thinking maybe a quarter out, a year out, what do I do with my company maybe even the next week? But VCs are thinking 10 years out,” Jess said. “Is this one of the 20 to 50 best companies I can partner with over the next 10 years?”
The more potential your company has for investors, the better your chances are of convincing them to partner with you. Instead of trying to sell where you’ll be in one year or how you’ll spend your Series A money, focus on convincing VCs that you are a worthy investment for the next decade. While short-term goals are important, if you want to capture an investor’s interest, you have to share your long-term vision with them.
Know The Potential Investing Pitfalls
The founder-investor relationship goes beyond just convincing an investor to partner with you as a founder—you have to make sure you want to partner with them, too. It can be particularly helpful talking to other founders about their experiences with certain investors before you decide to work with them.
“There is no substitute for talking to people who've actually worked with the investor before,” Waseem said. “I find that, in general, founders tend to be candid with other founders about what works well and what works poorly.”
Ask pointed questions like: What’s been the most frustrating part of working with this investor, or what part of your working relationship didn’t go as well as you'd hoped? Get a handle on the good and bad of working with someone before you commit to a long-term partnership.
“You’re trying to go into this with eyes open, and you have to understand that no one is perfect, so it’s better to go in knowing the strengths and limitations or the potential pitfalls than discovering them after the fact,” Waseem said.
Nobody’s perfect, but if you want to make an informed decision about your future business partners, you have to know what they’re like first.
Find an investor who believes in your vision
Starting a business is hard, so you need people who will stand by your side through thick and thin.
“Do they have that conviction in you, your business, and your industry,” Waseem said. “If they really just want to be the follower because someone else gets excited, that's actually probably not the type of partner that's going to serve you well on the journey.”
Your investors need to truly believe in the vision you have for your company, otherwise they’ll get frustrated if and when things start to go wrong. The question is not: are your investors going to be helpful when things are going great? The true question is: when things do not go as planned, how much do the investors believe in the team, mission, and opportunity?
Investors are true partners of your business, so they have to be dedicated to your mission and vision. Choose to work with someone who is going to have your back when times are good and bad. Finding investors isn’t easy, but if you know what you’re looking for and how to pitch your company, you will find the right partners.
Want to hear Jess and Waseem’s investor insights firsthand? Watch “How to get your first investor to say ‘yes’” on demand now.