Why finding investors that fit your mission is like dating.

So how do you get a ring on it?

Finding the perfect match isn’t always easy, whether it’s for a romantic or a business relationship. Building a company from the ground up can be a challenge but we’ve broken down a few steps that we’ve learned at air up that might help you if you’re thinking about starting your own business. The biggest question is: how do I get the funds to start and scale a company? 

There are three different ways for a company to get the money and necessary start-up capital

#1 Bootstrapping 

This means you use your own money or savings to invest in your dreams...Maybe a rich aunt could help fund the company? 

#2 Debt 

The term no one likes to hear, but this means borrowing money (i.e. from banks) which must be then paid back within a certain amount of time with additional interest rates. This can be difficult because banks only lend money to companies with a strong and PROVEN business model which ideally has generated cash in the past. As you might imagine that usually not the case for early-stage start-ups.

#3 Equity 

Raising money from external investors. This means finding the right investor to invest in your company which doesn’t have to be paid back as they are in fact buying a portion of your companies share capital. They’re investing in your hopes and dreams calculating that at some point your company (and their part of your company) will be worth more than it is right now. But you don’t want to just pick any investor.

So what type of investor is the right fit for you? Here are some of the types of investors you’ll come across.

#1 Business Angels & Family Office

These are high net, worth individuals investing their money or having a team of people doing the searching, vetting and investing on their behalf.

#2 Venture Capital Funds

Better known as “VCs”, these are institutional investment vehicles that invest money of others into early-stage, high-risk, high-potential return companies. Their money pool comes e.g. from pension funds, corporations, banks, etc. which get a return on their money invested but have no other participation rights. 

#3 Corporate VCs

Also known as “CVCs” Corporate Venture Capital funds. They’re the investment arm at large corporate companies and their purpose is usually to use investments for business development, with the perspective of gaining knowledge on emerging technologies and categories. 

Discussing the pros and cons of those kinds of investors is worth another article and a very important step in your funding process. It's important to mention that different investors focus on different funding stages so the following part shall give an overview of usual funding stages. So Once you’ve discovered decided on the best type of investor for your company, make sure to focus on those whos focus matches your funding stage

Here are the typical funding stages: Pre-Seed Funding, Seed Funding, and Series A. 

#1 Pre-Seed Funding

is the earliest stage of funding and it refers to the time when many company founders are getting their operations started. Usually, the Pre-Seed funders are the founders themselves and trying to cover the initial costs of setting up the business. This is really the development stage in which you are defining your business model and plans for the future.

#2 Seed Funding

is the equity funding stage, which means it’s usually the first external funding that businesses raise. This is when the business requires to start building a team (as the founders can no longer do everything) trying to gain traction and actually grow the business. Seed funding truly helps the company take its first steps. 

#3 Series A funding

comes in once you already have initial proof of a working business model. This shall usually help to further scale your business and professionalize your processes. During this round of funding, investors are looking for companies with strong strategies backing up their ideas and founder who know how to turn their ideas into a successful business. These investors are usually VCs and CVCs. 

Of course, there are many more funding rounds (Series B, Series C, ….) that potentially follow a Series A round and there are always exceptions to the rule. Some funding rounds can take longer than others and in general, everything turns out totally different from what you expected but finding the means and funds to grow your business is important. It helps to enable turning your strategies and ideas into reality, hiring a team, and sometimes simple measures letting your company live for some more months (aka lengthening your runway). 

It is important to find investors that fit your needs because successful funding is key to driving your company forward and becoming a (global) market leader. It’s also important to find investors so you’ll have financial security and be able to pursue ambitious strategic goals. It allows your team to feel comfortable and confident in its future growth plans. Getting investors on board doesn’t just mean finding the financial means to support your company but ideally also that you’ll be able to find valuable partners that can open more doors, and offer guidance, expertise, and networking opportunities.

Now, how do you convince investors to invest and commit to your brand? To your hopes and dreams? And “marry” into your business? And how do you find out who's Mr. or Mrs. Right?

Entering into a committed relationship with an investor can definitely be compared with and feel like dating: There’s the first date, making a good impression, and fostering a relationship to make a lasting partnership. It takes some effort and both parties have to want to make it work. 

Here are the 6 steps to tie the knot with a new investor: 

Step 1 - Screening (finding a match)

If you’re single and have had to swipe left and right, then you know that it’s not easy finding a match. There’s a lot that goes into finding a match that fits your personality and needs. Do they check off everything on your list? Looking for someone to invest in your company is no different, you want to make sure they fully understand and appreciate your brand while you want to make sure the other side can deliver on their promises. Making sure you’ve done some research (stalked them on Instagram) and know who you might be getting involved with is vital.

Step 2 - First Date (pitching) 

All right, so you’ve matched with someone, now it’s time to meet. The first date is always a bit nerve-wracking and making a good first impression often makes the difference. This is where you really want to be able to pitch your company spot on and leave a lasting impression. 

Step 3 - 2nd, 3rd, 4th, 5th...date (sign NDA and get to know each other) 

This is the “get to know each other” phase and it’s also evident that signing an NDA (non-disclosure agreement) is in order to make sure your date does not freely distribute your best-kept secrets. Business ideas and plans are to be taken seriously and signing an NDA will put you at peace of mind and allows for both partners to speak openly and build trust. 

Step 4 - The Engagement (sign term sheet) 

Great news! You’re engaged and have agreed on the high-level terms of your intended marriage (aka the number of children, living arrangements, etc)! A term sheet is signed and this means an agreement is made in good faith between you and the investor to soon close the round. A term sheet is usually “non-binding” so there’s always a chance to get out - for both sides. 

Step 5 - Prenuptials (full financial and legal Due Diligence (DD) and negotiation of contract details)

Here comes the legal bit, negotiate and remember to stand your ground and know exactly what you want. As for prenups, there are very capable lawyers to make sure everything is in order. Make use of them as the other side will definitely do so.

Step 6 - The Wedding Day! (sign/close contracts) 

Congratulations! You’re funded and committed to a new investor! Contracts are signed and you’re able to grow your business. “… until death do us part.” Especially holds true for getting an investor on board as there usually is no way out.

Remember a marriage is always a serious commitment and finding the right match takes work but in the end it’ll pay off, so make sure you find an investor that truly believes in you and your brand and one you can imagine to work with on a regular basis.