As a founder you may just be happy that somebody wants to invest in your business, but you should also consider some other factors, especially if you are exchanging a significant part of your equity for their cash. Look for the following: –
Alignment of interests: Look for investors who share your vision for the company and are aligned with your goals. The best investors are not there just to make a financial return but will also want to support the growth and success of the business. The latter should lead to the former.
Relevant experience: If you have a choice pick the investor who has experience in your industry or has successfully invested in companies in your space. This can provide valuable insights and guidance that can help your business grow.
Value-add beyond capital: Look for investors who can provide more than just funding. Consider how they can contribute to the business through their network, expertise, or strategic advice.
Reputation and track record: Do some research on the investor’s track record and reputation in the industry. Talk to other entrepreneurs who have worked with them and look for any warning signs or potential issues. It’s not wrong to check out the people who are buying into your business, it is not a one-way deal.
Communication and compatibility: Choose an investor who communicates effectively and is easy to work with. You want to have a good working relationship with your investor(s) especially if they will be significant stakeholder in the business.
Terms and conditions: Be sure to carefully review the terms and conditions of any investment offer, including the amount of control the investor will have, the terms of the investment, and any potential conflicts of interest. This is a negotiation after all.
