A get a lot of people asking me when the right time is to reach out and pop the question. Will you invest in me? This question has a complex answer and founders need to study a few key indicators when answering it.
This is an obvious one but it’s often overlooked. There are many times when founders pop the question, albeit with bravado, way too early. You need to be able to demonstrate significant traction relevant to the sort of investor you’re targeting. For friends, family and the like you may need little more than an app prototype, some early stage email signups and drive. But for smart money like proper angels, venture capitalists, and private equity investors you’re going to need to be able to demonstrate a whole lot more traction. They are looking for things like paying customer, large growth numbers and intelligent financial management. The key is to investigate what the investor looks for and make sure you cater to their needs before popping the question.
I’ve written about this one before and I believe it to be very relevant. If you ask for money you’ll get advice and if you ask for advice you’ll get money. Very few people succeed by asking for money off a cold pitch, not unless you’ve got some Facebook like growth. Investor’s invest in people they trust and you need to earn this trust. Sometimes it may take many coffee meetups, formal meetings, and catch ups before the relationship is ready. I feel it’s much easier to convert a mentor or advisor into an investor than a cold lead. So start your relationship out that way and work up to the investment.
3. Founder Prowess
Are you personally ready for the rigors of investment? If it were a walk in the park you’d see many more seed rounds. As a founder, you need to know everything about your business inside and out. Every question has an answer ready and nothing catches you off guard. When you pop the question and the rebuttal is fired you must be able to answer without wavering. I suggest watching tons of investors speaking, founder pitching and general Q&A on Youtube. Try and get someone friendly in the space to grill you as well!
4. Legal Readiness
Apart from yourself and your relationships, you need to be legally ready. Do you have the right documents like shareholder agreements, term sheets or the numerous others? This needs to be all pre-loaded by your lawyer. Time kills all deals and investors can get over the initial thrill. Make sure you work with your lawyer to structure everything ahead of time so it can be provided very quickly to close the deal.
If you tick all the boxes and your gut instinct says it’s time, go and raise that round.