3 Keys to Building Healthy Funding Relationships
By Evelyn Shumba
Just like a marriage, the relationship between a company and an investor can get complicated. If you choose the wrong funding partner, you may lose your own business or find yourself in a toxic unfruitful relationship.?So it’s critical to approach funding deals with a balance of excitement and caution.
Let’s go over a few issues you should look out for when choosing a funding partner match.
Understand the metrics
Both sides need to be on the same page about the metrics used to evaluate the company upon investment and during the course of the deal. Know which indicators the funding provider is most worried about for example:
Find a match
Knowing the funding partner’s culture and what they value is incredibly important because you’ll be working with them for the foreseeable future. Funders with a hands-on investment approach tend to provide more support and assistance, but usually expect to exert a lot more influence. Some funding partners prefer to stay on the financial side and step back when it comes to guidance and the day-to-day.?Choose a funding partner whose interests and approach match your own to avoid clashes in the future.
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If you are trying to stay as undiluted as possible and gunning for a simple sale in a couple of years, then a VC focused on finding the next unicorn isn’t for you. If you’re planning to scale to that level, then go for it but ensure the VC?can comfortably take on more funding rounds and stay with you for the long haul.
Also, build a relationship with a funding partner that has an appreciation of your market and business. This increases the likelihood of receiving maximum support to scale your business.
Find out more about their past
The help, support, advice, and mentorship that you’ll get from a funding partner is determined largely by their experiences in previous investments. So dig deeper into the successes and failures in their portfolio. Are there other businesses, with striking similarities to your own in their portfolio that are doing or did well? If there aren’t any it may not be the best fit.
In addition, how they’ve exited their investments in the past tells a story about how your own relationship may turn out. ?
It’s also important to note that the success of a VC firm has a lot to do with its circle. So look into their relationships, successes, testimonials, and happy investors.
Don’t get over-excited
Don’t let excitement push you into diving into a bad deal. Find a partner that not only brings the funds but also matches your business’s culture and long-term needs. Finally, you and your funding partner will be together for a while, so it’s important to get along well.?