Focus on investors that match your vision, stage, and culture

When trying to raise money, there are many considerations such as: Which growth path do I want to take? When to start talking to investors? How to outreach to an investor?

How much money should I raise? What valuation do I desire? What type of fundraising instrument? What is important in the pitch? 

I was speaking with an entrepreneur recently who was asking about how to best craft their pitch to investors. We spent a lot of time discussing the vision, the current reality, and what the ideal investor would look like. 

What is your vision?

At the end of the day, start with what you want for your company. This is your startup journey and you set the vision for what you want the company to be. Crafting the why and end goal for what you are doing is critically important to your team and customers, and will also help you focus on which type of investors to speak with.

What type of investor are you speaking with?

Most investors describe the types of deals, investment criteria, and portfolio companies on their website. You can generally get a pretty good sense of what stage, check size, industry, geography, demographics, etc. they are looking for. Fundraising can be a time consuming and frustrating process. So matching your vision and fundraising goals to firms that are a possible fit can help eliminate some of the noise and frustrations you encounter wasting time trying to force fit your vision and company against an investor that doesn’t typically do those types of deals. If an investor likes lots of revenue/customer traction and you are not there yet, that could be a tough process. Conversely, if the investor starts earlier and invests on the team & vision, financial traction may be less important.

What is the best marriage for you?

With tons of money out there in today’s market, all investors will pitch some combination of their industry experience, relationships, and “value-add.” The reality is most investors will deliver on that. I rarely hear entrepreneurs complain that an investor didn’t have the relationships or experience they claimed. More often, an entrepreneur complains that an investor was not the right culture fit. They were too aggressive, too hands-off, too demanding, too little patience, etc. Really spend time with these investors during the diligence process (and hopefully you have built relationships even before then) to understand if you are the right fit for each other and you would want to work for several years with this person/team. It is also important to talk with other entrepreneurs who have worked with these investors (both good and not so good outcomes) to learn how they handle different situations. Another lens to look at is where is your gap as a founder (industry experience, relationships, scaling a company, etc.) and which investor would help you best fill that gap by becoming part of the team.

Fundraising can be difficult, but focusing on investors that match your vision, stage, and culture can eliminate a lot of noise and allow you to find the best fit for your company.