When you’re a startup approaching investors for the first time, what’s the best way to score big? Depends on how you define the term “score big.” New York City venture capitalist Mark Hass says money isn’t everything.
“It’s about scoring big with the right partners,” says Hass, founding partner at Peconic First, a private equity firm that invests in early stage marketing and media companies. “The game of venture investments is not about raising money. It’s about building good strategic relationships with investors who will help your business grow.”
Here are some other tips from Haas and two other investors about what founders should think about when they sit across the table from the people who hold the purse strings.
Know all about the funders
Before you walk into a meeting with your awesome idea and dream team, remember that every investor has personal interests. More than just racking up equity, most investors like the idea of having a vested interest in your company and helping you move up to the next level.
“When I look at potential investments, I’m looking at my own background and my own interests,” says Hass, a WeWork Fulton Center member. “Every investor has a focus. I’m interested in augmented reality, social platforms, data analytics and media, so I look for companies I believe I can directly help grow through my relationships and insight.”
Hass says nothing gets the attention of investors more than a well-defined business plan in a field they’re highly passionate about.
Have a great support network
As a startup, a simple way to convince investors that your business idea is worth the risk is to show that others have already invested in you. Talk about the support you’ve garnered from mentors, colleagues, and customers. Funders look for that vote of confidence.
Sometimes, your biggest assets are people you’ve met through incubators and accelerators. If you’ve made important connections through startup programs, mention who these people are and how they’ve supported you.
“A lot of investors I’ve heard get comfort from startups coming out of incubators and accelerators,” says Andrew Wooley of ARC Capital. “Because they’ve done due diligence, it would give me a lot more confidence to want to invest.”
The WeWork Meatpacking member says that a problem for many early-stage companies is that they don’t have much of a track record.
“But if they perhaps come out of incubators or accelerators,” he says, “chances are they’ll have good mentors around them and people with experience in their space.”
Be prepared to ditch your script
As much as you’ve got a compelling story to tell, make sure you learn how to take questions on the fly. Practice in front of family, friends, and friends of friends. The more you anticipate questions investors might ask, the quicker you’ll be on your feet.
John Lanahan, senior associate at LaunchCapital, says more than a rehearsed sales pitch, it’s important for founders to have authentic conversations with the investors.
“I like entrepreneurs who are able to tell their story versus rely on a pitch deck,” says Lanahan, a WeWork Times Square member. “Sometimes when an entrepreneur comes in and I interrupt their slides, it throws them off track. But I like it when they’re able to then have a high-level conversation, get on a whiteboard and draw something up on the spot.”
Photo: Katelyn Perry