If you are looking for investment then always look to raise money at the right time and the right price. Sounds obvious and simple? It always takes longer than expected to raise money. Never knowingly leave it too late to raise funds. If fundraising is part of your journey then you should always be looking for investors, even when you don’t think you need them. Be in a constant raise mode. Take good money when it is offered, even if the timing isn’t perfect.
Once you have an offer, don’t get trapped into allowing an exclusivity period to run over. Some investors want you to run out of time. It gives them the upper hand when dealing with you. Use valuation as a negotiating tool and don’t be afraid to use a lower valuation to get greater gains elsewhere. Try not to get trapped into setting precedents for the future with multiple and or preferential share classes.
Rule number one when taking on investment is remember that investors only care about one thing: Their money. They will claim to be different but they aren’t.
It is not wrong, just the reality. If it is a fund then the investors in that fund will measure success by the returns they get. If it is an individual they will want their hard earned cash to deliver a profit. Do not expect empathy from investors. They will expect you to deliver on your deal agreement. No matter what the market conditions.
Here are my tips on what you can do:
- Try and get used to looking at the deal from the investors view, without taking their side. It will help to frame your approaches to them
- Put good legal structures in place to cover future eventualities
- Avoid ambiguity in legal documents
- Communicate regularly and clearly
- Do not surprise investors, it can be expensive!
Whilst there will be limited empathy for you, you will have to deal with the ups and downs of the emotions of your investors. Discover more tips on preparing to deal with investors in my book, The Money Train: 10 things young businesses need to know about investors.