Investment is the lifeblood of a startup, and it’s imperative to know how to get the right investments, at the right time, in the right way.
Typically, the first investment a company receives is 20 to 30 percent of its value, but investments can take many forms. The two most common are seed money (debt a company takes on at evaluation of specific price points), or a venture capital commitment (debt converts to shares given parameters). Regardless of the chosen approach, companies must manage expectations and relationships for success.
With insights from Jon Ferrara, CEO of Microsoft partner Nimble, we’ve created 10 tips to help you navigate the turbulent waters of investments. In 2017, Jon raised USD9 million in Series A investment funds to scale Nimble, the simple CRM for Office 365. He also founded GoldMine CRM, Microsoft’s top ISV partner in the 90s.
There’s plenty of money out there, but pick carefully because you could end up working together for a long time.
Top 10 tips
Know your stage. There are two stages you should understand: the concept stage and the go-big stage. In the first, you’re starting out with little more than an idea, so venture capitalists aren’t likely to invest without serious revenue. In the second, you should be generating robust income and greater interest from VCs.
Build your brand. Think about positioning, messaging, graphics, and consistency. Don’t worry about getting confined to a single approach. It can change as your company evolves.
Foster relationships. What creates trust? The human elements of reliability, relationships, and ethicality. Never lose these values in the marketplace rush. People build relationships around what Jon calls “the five Fs:” family, friends, food, fun, and fellowship. Keep these top of mind and leverage them.
Be an interest magnet. Don’t beg. Focus on building a company where people reach out to you as a trusted advisor around your company’s brand promise and areas of expertise.
Cultivate influencers. As Malcolm Gladwell noted in The Tipping Point, some people are better cultural influencers than others—be it locally (e.g., a niche blogger) or nationally (e.g., Mark Cuban). Be sure to include analysts, bloggers, prominent investors, and thought leaders in your circle of interaction.
Put others’ interests first. Dale Carnegie said it back in the 1950s: Know what people care about before talking about yourself. It’s your startup, but you’ve got to sell it in terms of others’ interests. After all, it’s their money.
Leverage social networking. Without consciously networking and leveraging social media across channels, your messaging becomes off-base and ineffective. Jon notes that without social networking, he couldn’t have built a relevant or authentic brand, network, or community. As important as social networking and media were a few years ago, they’re even more important today.
Don’t partner with investors—marry them. Picking the right investors is as critical as picking the right spouse. A worthwhile investment partner has to weather market shocks and startup pivots for the long haul.
Startups aren’t charities. Investors give money to those who don’t need it but who are ready to scale. Don’t take money too early and spend too much of it. VCs expect you to deliver growth.
Do your homework. Prepare for pitches by staying current on your space and reading your term sheets to define investment amounts, ownership, board, etc.As Jon advises, “Read every word and understand it—without a lawyer.”
With these tips in mind, time to dip your toes in the investment waters and get your ideas and passions off the ground. Remember, this isn’t a solo journey: Lean on friends, family, co-founders, team members, and mentors as you seek investment and write the next rewarding chapter in your startup venture.
Has your company found investment success? Share your story with #MSPartnerStory and connect with the Microsoft Partner Community here.