Lessons from Founders
Raising capital… As every founder knows, it is not easy to raise capital. With rare exception, founders must meet many prospective investors — be they wealthy individuals, venture funds or strategic investors — in order to find so called ‘smart money’. We have invested in over 50 ventures, we have joined more than 100 passionate founders on their journeys and so we have a good idea as to the challenges founders face.
The angel investor market is highly fragmented. This is the nature of angel investors, whether in Australia, San Francisco or Tel Aviv. That is great news for founders. If you have an interesting business and you are committed to it, there is angel money out there for you. But you have to work for it. For some the right investor comes along in the first few meetings, for others it can take months or even years. That may not be fair, but it is the way it is. And if you consider every meeting to be an opportunity to refine your story, this capital raising journey is valuable in the long term.
Meeting investors… The early stage investment community is an incredibly broad church. As a founder, it is very important to focus on finding the right investor. The right people who believe in your vision and can support your venture. Angel investors sometimes focus on the wrong things and this can be very distracting for founders. The best investors have experience with early stage investing; they understand the challenges you face and they help you focus on the right things. ‘Investor fit’ is not easy. It takes time. However, it is worth taking the time to get it right.
Some investors will be a fit for your business, while others never will be. Momentum is important in any capital raising process and so an investor that does not resonate with your story out of the gate, may not be the right investor for you. There are plenty of fish in the sea.
Identifying the right investor… Finding the right investor comes down to three things:
1. A shared vision: as a founder, you should focus on investors that quickly understand your story. If an investor doesn’t get what you are trying to do, move on.
2. Alignment of time horizon: a good test is to understand if an investors’ time horizon is aligned with your time horizon as a founder. If an investor does not ask where you want to be in five years, there is a signal in that.
3. Trust: what does your gut tell you? You don’t have to think the same way your investor does, it is often an advantage not to. But you do have to trust your investor and it is equally important that they trust you.
Hiring teams… Hiring people is harder than raising capital. It is really difficult to get it right and the impact of a poor hire is significant. The reality is you get better with experience. Trust your ‘spider sense’. Close your eyes and ask yourself do you think this is the right person. Move past your desperation to fill the role and ask yourself is this really the right person. A candidate may look terrific on paper but always ask yourself, “are they the right fit for your business?”
And some advice for investors… Investors are often focused on financials, the business model or the market. This is important of course, but people matter most. Any investor should always ask first “why are you building this business, what is your mission?” It is the critical question and it will tell you more about the chances for ultimate success that any discussion about forecast numbers
A final note… Most importantly, any founder should always remember, raising capital is not a measure of success. It is a ticket to play the game.
Thank you to some exceptional founders: Marisol Challen (PayNinja), Anthony Eisen (AfterPay), Mario Hasanakos (Spriggy) and Jack Stevens (EdStart) for their insights many of which I have included in this article.
You can watch a fireside between Ben Heap & Anthony Eisen here: https://youtu.be/4w-_TPhrYlM and a panel between Marisol, Mario & Jack here: https://youtu.be/9MDK-foVnos
