In part one of our blog last month, we explored the impact of the COVID pandemic on venture capitalists and other investments for startups over the last 12 months.
In part two, we explore the subject further by looking at how to find and secure investments as a startup founder.
Who are you targeting?
Depending on where your business is within its life will also depend on which type of investors you will need to secure.
If your startup is in its infancy, especially seed or early stage, venture capitalists will be your target. For investments in more mature businesses – corporate finance is more aligned. At the idea stage of your startup, you may find that the major investor is you, and any funds that you can raise through personal connections.
In many cases, however, you should look to mix and match throughout the stages of your business to ensure that you have multiple diverse capital streams.
The Seed Stage will start to really mark the point at which your business growth comes to fruition, and you will begin to gather customers. This stage often marks the point where major investment is required, and you will need to move away from your individual investors and look towards investment firms such as venture capitalists.
Investors are not lenders
The fundamental difference between investors and lenders is that lenders will look for any borrowings or loans to be repaid with interest. Investors give you money in exchange for an ownership share in your business. Their investment may also come with restrictions that you need approval on, i.e. approvals for large transactions or demands such as having a presence on your board.
Your idea counts for everything
Even in these challenging times, investors are still investing, as we discussed in the first part of this article.
However, they are cautious with their investments and, as such, will be looking for something really special or for businesses who are demonstrating innovation in particular sectors. Currently, the best industry sectors to attract investment are health – particularly life sciences and biotech, education technology (as seen by the huge growth in online learning during the COVID 19 pandemic) and Fintech.
Investors are always on the lookout for a “special something”. Unicorn businesses don’t come along very often – these are privately-owned companies that have a valuation in excess of $1Bn. Finding such a startup is a rare event – a little like finding a unicorn – hence the phrase.
For most startups, having a rock-solid business plan, a strong narrative and a clear investment structure will be exactly what investors are looking for.
Investors are investing in you and your startups
It is easy to forget that investors are not only looking at your business idea. They are also looking at whether you are someone that they can invest time and money in.
Here is where you can be clear and transparent about your values and business vision.
These leadership traits are amongst the strongest when looking investors are looking at the people who are leading these startups. They will be drawn to you as a person and will often share your values and understand your vision.
They want to see how you manage under pressure, whether you have the leadership attributes to translate your business vision into an executable strategy, and they will look at your decision-making process.
After all, if you were investing in a business, wouldn’t you want to ensure that the founder was someone that you believed in, you trusted, and you shared a rapport with?
Investment is out there for startup founders, yes it may be more difficult to come by at all stages of investment rounds, and it may take longer than usual, but with good preparation, a watertight business plan and a founder who can share and execute the vision of the business you can find and secure that much-needed investment.
Sue Rees is an expert C-Suite executive search specialist with over 25 years of experience in Pharma, Biotech, Lifesciences etc.