Most startups have to go through the hassle of fundraising at some point of time, and they have to find the right investor or a set of investors that believe in the startups’ potential and vision. And if you’re just starting out, chances are this process would be quite daunting, long and stressful. Carlos Eduardo Espinal writes in his book, Fundraising Field Guide, “Early on, when you’re a small team, fundraising efforts will likely consume far more time than you’d like them to, but there is unfortunately no shortcut to the process.”
He also highlights that unless you’re really lucky, chances are you’d have to meet numerous kinds of investors before you finding the right fit for your startup and your vision. During this process, you might bump into all kinds and types of investors, the good, the bad and the ugly.
Here’s a list of the different types of investors that you’re likely to meet along the way.
1. The Unbelievers
For starters, these are investors that don’t believe in your overall vision, and if they do, they have no faith in your ability as a CEO/founder to run a startup, and neither do they believe in your team’s ability to execute. So you’ll definitely get a lot of groans and you’ll quickly identify all the dismayed facial expressions in the room. The key however is to take DJ Khaled’s advice and know that they don’t want you to win. However, you have to keep it moving.
2. The “We-Should-Be-Friends” Investor
These are the investors that will meet you primarily because they want to invest in your competitor. Most probably, they’re interested in getting a feel for the overall landscape and to also understand where each startup is in terms of growth and development.
So while they may like your pitch, your personality, and even your startup, they’re most probably going to be taking their investment to your competitor down the street for whatever the reason.
3. The Fakers
While you crisscross between different investment firms and social gatherings to meet potential investors, you’ll definitely run into “The Fakers”. These are the investors that are probably out of money to invest but since they have to appear like they’re active in the ecosystem, they’re present at every single event and every single pitch.
Frank Lucas said it better, “The loudest one in the room is the weakest one in the room.”
4. The OCD Investor
By now, it should be common knowledge that most of the stats, trends and forecasts that early stage startups spew out during pitches aren’t entirely true. Seasoned entrepreneurs and investors alike understand this and place more importance on the intangibles like vision, passion and the drive of an entrepreneur.
However, the OCD investor wants to know every inch of detail about what you will be doing for the next five years (or every single week), even though both of you know that your projections will be speculative at best and hogwash at worst.
5. The Outdated Investor
Once in a while, you’ll most definitely meet an investor that has no clue about what your doing. Absolutely none but rather than simply asking and clarifying their ignorance, however, they’ll still give you an opinion about your product simply because they feel obligated to do so and they want to appear wise and opinionated.
6. The Growth-Seeking Investor
Carlos described them as, “Investors who are amazing and give you insanely poignant advice, but they would want to see more traction before they can consider investing.” These are definitely a group of investors that you should listen to, so that you can better align yourself to achieve your early stage milestones. And if you’re able to show drive and traction, such investors will be more than willing to help you out with your endeavours.
7. The “I-Don’t-Want-To-Lead” Investor
These investors will definitely be of great help to your startup if they’re part of your investor roster, as they’d bring a great amount of feedback and connections to your startup. However, the only hindrance to such investors is that they’d rather wait for another investor to take charge before investing in a startup.
Most investors work towards de-risking their investments, and co-investing with another notable investor is one good way to do so. So if you’re unable to look for one that’s willing to lead the fundraising round, this negotiation will eventually fall through.
8. The Spray and Pray Investor
Occasionally, there are certain investors and investment firms that just invest in any and every kind of startup. The idea doesn’t necessarily matter to them, they just spread their money out in as many startups as they possibly can, and they just pray that one of them ends up becoming a success.
It’s very easy to identify such an investor as they would’ve probably invested in every single startup within your vicinity.
9. The Right Investor
The fact of the matter is that as an upcoming entrepreneur, you’d probably meet a lot of different kinds and types of investors before eventually meeting the right one for you. This type of investor is one that understands what you’re trying to achieve and believes in your insight and your team’s ability to execute on that vision. This is a type of investor that every startup needs as they’re both willing to help you with their knowledge and connections, and as well as helping you with finances.
When you’re looking to raise funds, chances are that you’ll run into a lot of investors that don’t want to invest in your startup but the key is to always keep moving and you’ll eventually run into the right investor who will support your vision.