Steli and Hiten have a lot of thoughts on fundraising, and they thought they’d talk about it from the perspective of entrepreneurs understanding investors better.
The most common thing that founders forget is that investing is an investor’s business. Their goal is to make money on it and that’s what’s in their mind; that’s the number one thing. More importantly, just like you’re raising money and building a business, they’ve taken money to raise more money, just like you’re going to do. Their obligation is to make that money turn into more money, so that everyone makes more money!
Today’s topics included:
- Managing expectations
- Seeing investors as bankers
- Understanding what the dynamics are
- How to avoid first-time mistakes with investors
- The characteristics of a good business partner
- Understanding where investors are coming from
In the early relationship-building phase with the investor, think about what’s going to happen when things aren’t going well. Go find the companies you know have been through hard times when that investor was involved.
No investor is going to determine the success of the business at the end of the day, and if they are, that means that you’re a really shitty startup; you want an investor who will support you, but you’re the one who has to make it successful.
Tips of the day:
Steli: As a founder, the psychology you come into the relationship with is that you’re trying to find love. An investor is a professional: they’re dating and they’re going to continue dating, flirting and growing their dating portfolio, because they’re not going to bet everything over the next few years off just your venture. Try to figure out how to benefit them and benefit back to make this a really productive relationship. Don’t be overly emotional: don’t fall madly in love, don’t be insanely excited. Keep your emotions in check, because an excess of them only leads to disappointment down the line. You just have to be realistic about who you’re getting in bed with.
Hiten: First and foremost, you’re building a relationship with a human being. Figure out if it makes sense to work together. If you think of it as the factors that are required to make the partnership work, I think you’ll have a different frame of mind and think that they control your destiny; they’re not God; they don’t. You control your destiny.