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January 29, 2017
Choose your investors carefully. This is an important statement because it can mean the difference between your startup’s success and its failure.
Let’s take a look at why you need to be careful about who you let invest in your startup.
This may seem counter-intuitive, but in all reality, friends and family don’t always make the best investors.
We acknowledge that friends and family are often the first people startup founders look to for cash.
Sometimes this works out great, but for those of you who have a nagging feeling about taking on Uncle Matt as an investor, we advise you to listen to your intuition.
Before you let friends and family invest in your startup, you want to set some ground rules:
You want to make sure your angel investors have some experience in this type of investment. It’s hard enough to start a business without having to devote time to a large learning curve on angel investments.
Plus, you want to make sure their portfolio consists of multiple investments. This lets you know they have experience and can handle your startup.
Get to know your potential angel investors and do your research. Talk to other portfolio CEOs about their relationships with a particular investor.
They can shed light on whether or not your investor is easy to work with or too controlling. It’s much easier to look for money elsewhere than it is to break up with an investor after the fact.
Many startups are looking towards accelerators to get their startup off the ground. Accelerators can provide you with money as well as office space, mentor-ship and marketing in exchange for a piece of your company.
Be careful when choosing to partner with an accelerator and watch out for the following:
If you’re like many startup owners, you might think you need an infusion of cash, and it doesn’t matter where it comes from. This can’t be further from the truth.
Not only do you have to be careful who your investors are, but you need to manage your investors to avoid overly stressful problems and the death of your startup.
Finding the right investors and managing them is part of your job as a startup founder. Here are a couple of “rules” to follow when it comes to your investors:
After all, they’ve given you their money. Plus, they may have some insights that prove useful.
That isn’t their job. It’s yours. You don’t want to give in to investors when you know it’s not right for your company. You’ll find it’s a fine balance between pleasing your investors, keeping them informed, seeking their counsel and letting them take over.
A word of advice, though – if you took on venture capital, then your investors most likely make up your board. This means they really are your boss. It can be a slippery slope, so you want to stay connected with your investors while still managing your startup.
Bottom line – you can’t fire your venture capitalist.
As long as you keep them in the know, have the same goals, manage your startup properly, and gain traction quickly, you’ll find that you earn the trust of your investors.
Escalon can help ensure that your accounting, financial records and taxes are accurately done and that they communicate the full value of your business to potential buyers. Talk to an expert today.
Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.
Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.
Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.
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