If you’re considering starting a product based company, you’re going to likely need to bring on investors sooner or later.
The thought of bringing an investor into your business may be terrifying. You’re not sure what to look out for and you don’t know who’s going to have you and your business’ best interests at heart.
You’ll find that some investors will want complete access to your financials, and others may just want the surface-level information. It’s up to you to figure out what YOU want out of an investor before you go out on the hunt for one, and I’m here to help!
Look for Money Before You Need Money
The number one thing you should remember is that you need to start looking for investors before you actually need money. If you don’t have any money, and are in desperate need of it, as our Success Unfiltered guest Danielle Livolsi explains, “investors can sniff that vulnerability out”.
If you’ve waited until the last minute and you have salaries due or invoices need to be paid, investors may take advantage of you. They may look at your desperation and offer you the money you seek, but with unfair terms. You’ll feel obligated to take them because you know you need the money, and don’t have a lot of options.
Instead what makes more sense is presenting your company in a way that allows these individuals to see what an amazing investment you and your company are. Plan to start looking for investors early.
A good rule of thumb is to have 8 to 9 months of capital stashed away before you head out on the trail to find new investors. This presents your business in a way that others will see the benefits of giving you money. They’ll see the potential for a return on their investment.
On the flip side, if you wait too long, investors may wonder, one, why you waited so long to go out on the hunt, and two, why other investors haven’t stepped forward to write you a check.
Trust me and trust Danielle– look for investors as soon as possible.
Who Do You Want in Your Sandbox?
That might be funny to read, but take my advice seriously; Who do you want to partner up with?
The people you bring on will be people you’ll likely be working closely with. You’ll want them to respect you, your business and each other.
Danielle shared a great story about when she started NuttZo she was looking for investors, and she thought she had found the perfect match. The investor himself was really interested in the business model that NuttZo has. The problem was, that the investor had someone who acted as the gatekeeper. He was an older gentleman who was really good with finance and accounting, but was unbelievably annoying at the games he would play.
As you know, entrepreneurs wear a gazillion hats, and put out a hundred fires a day, the last thing Danielle needed was someone to put her through all sorts of tests. He would send her multiple emails, asking all sorts of questions, things she had already answered, and expect her to come down to his offices whenever he needed her.
She decided to turn down this investor because she did not want to deal with that type of micromanaging from an investor in her business.
Trust your gut!
If you’re on the lookout for someone to invest in your company and something feels a bit off, don’t continue that relationship. Don’t be scared to cut off from that investor because there will be others and you don’t want to waste your time with someone who you don’t care for.
Money is easy to find, but you want people who align with your business.
Don’t Be Afraid to Bootstrap
In the beginning of your business you’ll likely want to keep as much control of your company as possible, so don’t be afraid to bootstrap.
Never heard the term bootstrapping?
Essentially bootstrapping means that you use your own money to fund your company, or you reinvest the money you make from your business back into it.
This allows you to keep control of your business for as long as absolutely possible. If you’re only playing with your own money, then you do not have to answer to anyone about your financials except yourself (and maybe your accountant).
This might sound scary, but honestly it might be one of the easiest ways to get into business. Start lean. Create your product at the bare minimum costs possible. DO NOT worry about the bells and whistles, or having the best ad network, instead, create a product that people can’t wait to get their hands on. Then, try word of mouth advertising, before investing tons of money into an ad network where you’re not sure who to even target.
See! That doesn’t seem so scary now, does it?
If you’re actually in love with your product, getting to spend that much time with it may actually be exciting!
There will no doubt come a time when you want to bring on investors, but do your very best to find those that fit you and your business’s mission, values, and vision. You won’t want to work with someone that doesn’t align with your views and who doesn’t have your best interests at heart.
Now, it’s time to take action! Move past the fear and get that business off the ground.