In this episode you will learn:
- what investor relations are
- what changes in a startup after an investor’s entrance into the project and what impact the investor has on the project
- whether an investor’s entry into a project may be detrimental to a startup and why
- what are the most common mistakes in investor-startup relations
Tomek Popów is currently investing in startups, but he started his career as an entrepreneur. Thanks to this, he knows the investor market from both sides: the founder building a business with his own as well as external funds, and the investor looking for interesting startups to support their development.
What is the relationship between a startup and an investor? Tomek emphasises that the founder is the owner of the business, and the investor is a guest in his company. He describes this mutual relationship as very strong, but one that lasts a certain amount of time. What is important, it is the originator who has to find out where to get the money for the business, and the decision to cooperate with a VC fund has to be very well thought out. Starting such cooperation means for a startup the necessity to collect successive rounds of financing, and thus the pressure for constant growth. Our interlocutor stresses that not every type of business is suitable for this kind of financing and not every business will benefit from it.
Choosing an investor for your business
So how to match an investor with your business in order to benefit from this relationship and not lose out? Tomek stresses that when investing at the seed stage, you are not really investing in an idea but in a person, a founder. This is very important because the idea itself or the business model will certainly change in the future, but the leader will remain the same. What is important is the founder’s personality, how convincing he/she is to the investor and whether he/she will leave the impression that ‘this is the man’, that ‘he/she will prove it’.
Does the investor interfere heavily in the startups in his portfolio? It does happen. Tomek points out that a difficult moment in companies is a test of the relationship between an investor and a startup. It is important that the investor does not add to the problems of a startup that is going through a difficult time. He emphasises that the entry of an investor into a project makes the process of choosing the direction of development more democratic and negotiable, taking away the founder’s 100% autonomy.
Honesty above all
So what are the most common mistakes startups make? Our expert says that founders often misrepresent reality and pretend that their business is in a different place than it actually is. They also fail to answer basic questions, such as how to get their first customer. Tom believes that in investor interviews it is important to take off the mask and talk honestly with each other.
And who should handle investor relations in a startup? According to our expert, until a certain level of revenue is reached, these relations should be handled by the founder. And even if a given fund does not decide to invest at the moment, it is worth keeping in touch with them and informing them about their progress and results.
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