What Startups Owe to Investors? A LOT.
Investors owe a lot to startups. But what about startups themselves? Well, they do.
Here are some:
1. No paper-ideas PLEASE
Nobody cares about the paper ideas. You have to get shipping or shut the f**k up. Forget about Investors, even we receive a lot of emails which starts on a basic premise that ‘I can’t get started till I have funding’.
Sorry – nobody is in a business to get you started.
For more, listen to Printo cofounder, Manish’s talk (at UnPluggd) where he talks about stationary vs. moving trains.
2. Stop that NDA talk, Will You?
During the last UnPluggd demo stage selection, one startup requested that we sign NDA before they share details of the product with us.
Seriously! Stop believing that investors (including angels) are out there to steal your ideas.
Avoiding the cliche that ‘If anybody can execute it so easily, then it’s not worth doing’, the truth is that investors see close to 500 plans a month. Imagine them signing 500 NDAs (or UPAs to tickle your funny bone) every month! At what productivity level will they operate? When will they get time to take few discussions to the next level?
Having said that, it’s your DUTY to ensure that you do a basic research on investors and see if they already have invested in a similar idea (in which case, you wouldn’t want to open up everything).
3. Understand WHY they’re (NOT) investing.
Don’t Feel Hurt And Bitch Later Please
Investors don’t reject just for your business plan alone. There are several other reasons beyond your control (example: Investor’s focus in the segment).
Understand that and respect that. Importantly, note that Investor is NOT rejecting YOU. They are rejecting YOUR business plan, based on the pitch/discussion.
They have very limited visibility into your business and they are NOT domain experts (like you), so the rejection is purely based on the discussion you have had with them and *their* understanding of the space.
There is a context to rejections and most entrepreneurs often take these rejections very personally. Don’t.
It’s business. For them. And For You. So Don’t Take it Personally.
“Actors search for rejection. If they don’t get it they reject themselves” Charlie Chaplin
4. Keep them in the loop as you make decisions.
Like VCs, entrepreneurs are also fishing for term sheets (and that’s totally cool). So if you are in an advance discussion with a fund, keep others informed.
Apart from creating pressure on other funds, this also helps build long term (professional) relationship.
Why would you need that?
Unless the current round is the last round you will ever raise, there is a high probability that you will end up meeting the same fund (and person) for your next round. Unless you are in high demand (i.e. commanding position, i.e. VCs running after you), your past relationship with the investor will decide the next course of action.
REMEMBER: Fund raising is still a people business, just the way sales or hiring is. It’s a LOT about relationships.
Do it professionally.
As an early stage startup, do you really need to pitch to funds which are known to invest only in Series A onwards? Whose time are you wasting? Both yours and the investor’s.
Startups need to conduct basic research before even sending a ‘I want to pitch’ email. Right from fund’s portfolio strategy to the stage they invest in, to locational preference etc etc – you need to do some serious research on investors/angels.
If you are looking for feedback, look for feedback. Do NOT pitch for funding then.
Aside, remember the famous saying that goes as
If you are looking for funding, ask for feedback. If you are looking for feedback, ask for funding.
TL;DR : Not just investors, these are some of the key points that startups owe to themselves. Avoid drinking your Kool Aid.