Featured in Alltop StartUpRoar

Monday, October 29, 2012

Finding Investors is highly dependent on your ability to network

Grow your network far and wide.  It will serve you well!

Startups always are seeking funding, the task that is a never-ending battle.  Questions in social networking sites suggest that many entrepreneurs do not know how to start the process or how to find investors.  The answer is NETWORK!  Experienced entrepreneurs use their network extensively in seeking funding.  The inexperienced need to develop a network but can make use of their limited contacts to help.  The key is to learn to network in a focused manner and continue to build and cultivate the network.

Investors come in a wide range of experiences.  The hedge funds, traditional funds, and VCs are filled with professionals with extensive experience in the investment business.  Angel investors may have experience investing in the area of your technology but many do not.  Family and friends are likely the least experienced at investing.  The investment made by each will depend on their financial capacity, internal limits of the finances for each investment, and their comfort with the company.  The deal structures will vary significantly dependent on their experience investing in early stage companies.  Finding the best match for your company requires reaching out to many and finding the few that will consider an investment.

If you have previously raised capital in a similar field, you likely have met many of the investors with interest in the space your new company is working.  The fund investors tend to move around a lot, but most likely, you still know people in the funds.  You may be lucky to find a very familiar person having moved to a new fund with greater capacity to invest.  A new entrepreneur will not have the same knowledge of the investment community.  In addition, if you have not worked on related technology, you may be familiar with investments in general, but not know the people in the funds.  You must network to get to the right investors for you.

Regardless of your experience level, networking is crucial to finding the best investors for your stage of development.  Many times, you can get introductions to angels and professionals via your friends, family, or service providers.  Others that have viewed the technology and passed because it was not a fit may be willing to introduce you to an investor more likely to take interest.  Introduction by someone known and trusted improves the comfort level of the investor.  The fact that someone vouched for you may be just enough to get a meeting.

In a recent conference, a well-known VC stated that they received many business plans each year; usually the number was in the 500 – 800 range.  They found it impossible to review all of them and their goal was to make 4-8 investments per year.  One of the strategies this VC used was to determine if they knew any of the people or were if someone they knew introduced the company to them.  This factor of being known or introduced was essential to having a closer review of the business plan and important to getting a meeting.

One of the greatest skills that will carry you and your company further is the skill of networking.  You should approach conferences, meetings, and events with the idea of getting to know people.  Follow up with new contacts and establish a relationship.  Determine those most like the people you want to work with in the future.  Spend time speaking with your service providers like lawyers and accountants.  They usually work for other companies and some know funds or angels.  When your network better understand your skills and values, they will usually be more than willing to introduce you to someone that could become a future investor.

One of the best ways you can help your company is networking.  This single skill will take you well beyond what you can do alone.  Your network is a great asset if you use them properly and do not abuse them!