Mastering The Art of Investor Approach

For many startups, attracting the right investors can be crucial for achieving their goals. However, knowing when and how to approach investors, as well as how to select the right investors, can be a daunting task for many founders. In this context, it is important to understand the different stages of start-up development and the investors' expectations at each stage. 

Additionally, founders must know what investors look for in a start-up and what gaps may exist between investors and founders. This knowledge can help start-ups to better prepare themselves for the fundraising process and increase their chances of success.

In a conversation with Mr Ashish Jain, Founder, The Startup Board, a technology platform to connect Founders, Mentors and Investors, we tried to find out the right way for Startups to approach the investors. 

Ashish has been an entrepreneur for over a decade, he was the CEO of JSS Incubator and has worked in the corporates as a Senior IT Professional for many years after finishing MBA from IIM Kolkata.

Ashish is on a mission to enhance the success ratio for Start-ups from current 10% to 20% by 2025. He helps founders with corporate connect for revenue. He mentors on go-to-market strategy and overcoming execution challenges.

When should founders approach the investors?

The Idea Stage Founders Should not approach the investors, as Investors (Angel, HNI or venture capitalist) most likely would not be interested without seeing a product. Only exception is when founder has past credibility of successful business or founder has patents on the technology, for which product is expected to be built around. These founders, instead, should reach out to incubators for government funds.

The Seed Stage Founders should approach the investors when product has a Minimum Viable Product (MVP) and it has been shown to certain potential customers. The feedback has come and potential established. This stage founders can reach out to angel investment groups like IAN, Mumbai Angels, Venture Catalysts, Lets Venture, Ah Venture, Karekabe Ventures etc.

The Growth Stage Founders are at mature seed stage or revenue generating startups. They can reach to angel networks or venture capitalist. Key is market traction that will speak for their venture. If market acceptance (users, customers, revenue etc) are not available, then this set of investors are least interested. 

How long have you been advising startups on investment and economic growth?

It has been over 10 years now, to be mentoring founders of various stages of ventures. Last 5 years have been full time and very intense mentoring and advising for startups from India and abroad. 

What are the hidden details the investors look out for in start-ups for funding them?

Majority of Investors put their money on founders. If founders are unable to execute, even a brilliant idea, it is money wasted. Huge emphasis is given on finding out a) founders’ value system b) initial team chemistry and complementarity c) aggressiveness and passion to build the business.

Besides founders, emphasis is given on what is the moat (entry barrier) venture is likely to create based on their product and timing.

No investor gives money just to start a business, so how should a start-up pitch to get his idea funded?

Idea stage founders will need to either put in their own money, take it from family and friends or approach the incubators that have government funds to disburse. 

What are the tips for Founders for choosing the right investors?

Money /investment from the investor is only the first step. It is a kind of marriage between the founder and the investor. You need to traverse the subsequent journey together. It becomes important for founders to choose an investor who

1. Have good connections and can help founders to get business from
2. Have no nit-pricking attitude, not to interfere in daily operational details and be restricted to strategic inputs and monitoring from a distance
3. Is reputed in the market for rational decision making, inviting subsequent investors
4. Investor, by himself, or through his set of connections, know the domain and can constructively contribute

What are the identified gaps between Investors and Founders? How can a startup fill this before pitching for the funds?

Founders should do the research on investors, just like investors do on founders. Founders, at times, get desperate. That is not healthy for them and ends up losing the deal or negotiate at a lower valuation. Third, founders should look for investors and talk to them even if they don’t need money at that time. This means, maintain relationship with investors and keep sending important venture updates to them. 

For many startups, approaching investors is a crucial step, but it requires careful planning and preparation. Understanding the different stages of startup development and what investors look for in a startup is essential to increase the chances of success. 

Founders should also be aware of the gaps between investors and themselves and take steps to fill those gaps before approaching investors. It is crucial to choose the right investor who can provide not just financial support, but also strategic guidance, and have a good network to help the startup grow. 

Finally, maintaining relationships with investors and keeping them updated about the startup's progress is important for building trust and securing future investments. By following these guidelines, startups can increase their chances of securing funding and achieving their goals.