More and more start-ups are seeking private funding, not only to help them scale up, but also to help overcome any obstacles and uncertainty that may have come their way over the last eighteen months.
But how do you make sure you find the right funding partner?
If you are searching for an investor, it’s natural to focus on being able to answer all their questions. And, while there are many things that investors will look for in a start-up to make sure that it’s a good opportunity, it’s also imperative that you find a funding partner that is the right fit for you.
And in order to do this, you’ll need to ask certain questions of them.
So, in this blog, we’ll explore the questions that you should ask a funding partner or investor
What questions should you ask when searching for funding?
So, what kind of things should you ask investors (or yourself).
We’ve identified five key questions that you should ask a funding partner before receiving investment:
- What is your investment philosophy?
- Do you have experience with investing in my industry or sector?
- What’s your investment timeline?
- What factors have led to success in your past investments?
Do we want the same things?
1. What is your investment strategy?
Your start-up is likely to have a unique personality, culture and philosophy of its own. This is a crucial part of any young business, it’s what makes it stand out from the rest of the marketplace and can be the difference between success and failure.
It’s important that your investor and you share similar values and philosophy.
So, one of the first things that you need to understand from any investor is what their philosophy and investment strategy is.
Are they looking for long-term value or a quick win?
Do they have a specific industry or expertise?
Aligning with an investor who shares your values will ensure that the company grows in the way that you want it to, and you’ll achieve the result that you want.
Don’t forget that you are choosing a partner, not just an ATM.
2. Does the investor have experience in your industry?
Choosing an investor is not all about the money, they bring so much more to the table than that, and one of those things is experience.
It’s beneficial if your investors understand the industry and business model of your start-up. Not only so that they are able to understand the vision that you have for the business, but so that they can lend a helping hand (when needed) to ensure that the business is successful.
This might not be make-or-break in your industry, but there are definitely some sectors where shared experience is crucial. Industries such as Fintech or other technology industries may benefit from the investors experience, especially if your aim is to quickly increase market share without overthrowing the status-quo.
If your start-up is revolutionising the industry in the way that Uber or Netflix disrupted the marketplace, then you’ll struggle to find investors with specific market experience, therefore direct experience may be less essential or realistic.
This is something that will have to be evaluated on a case by case basis, however either way it’s essential that you understand what experience your investor has, and what input they are going to have into your business.
3. What’s your investment timeline?
If you are in the process of searching for funding, then it’s important that you find out what your partner’s timelines are for investing.
Do they currently have cash ready to invest?
Are they looking for future investment opportunities?
Knowing where they are at in their stage of readiness to invest will help you decide whether they are the right partner for you at this time in a very practical sense.
If you need investment now, even if they fit all the other requirements then it still might not work out.
4. What factors have led to past investment success?
Remember what we said, funding partners bring so much more to the table than their cheque book.
It’s a really good idea before getting into bed with an investment partner to get a feel for their past successes (and failures) in the investment process.
What was the single most important factor that led to success in prior investments?
Not only does this help you evaluate their experience and their suitability for the role, but it allows you to learn from past mistakes in order to avoid them and increase the chance of your success.
5. Do we want the same things?
It’s easy to forget about what you want. But this is potentially one of the biggest questions you need to ask yourself before committing to a funding partner.
This affects not only your business long-term but also what your business needs from them as an investor.
You should be really clear about what the relationship looks like, and what your long-term goals are as well as theirs. This will allow you to attract great investors, but will also ensure a mutually beneficial partnership that will allow you both to get what you need.
Are you ready to look for a funding partner?
Launching a start-up isn’t easy, and a funding partner can not only help financially but also offer experience that may be the difference between the success and failure of your business.
That’s why it’s so important that you find a funding partner that is a good fit for you and your business.
While investors may be evaluating your business to check if it is a good investment opportunity, you should be asking questions to ensure that they will be the right investor for your business.
Choosing the right funding partner that matches your vision will ensure that the business grows in the way you want it to.
If you are ready to secure a funding partner then we recommend that you read this blog of ours to find out how to make your start-up attractive to investors