Matching investors and investments is a two-way street. Investors and companies alike look for a good fit. Strategic investors are ideal for most growth companies. However, every company seeking capital must ensure that it fits into the particular investor’s model and goals. In fact, many investors look for particular things, and it is important to know whether your company is a proper fit for that investor. Because investments in growth companies are generally long term, it is important to realize that these investors are more than mere sources of capital — they are also partners whose goals and strategies must align with those of the company.
Invest in management. In making an investment decision, investors consider a growth company’s management as well as its business and pitch materials and track record. The “younger” the company, the greater the emphasis and importance placed on the role of management. With respect to such companies, as well as those that are still in growth stages, investors look at management’s ability to plan for and adapt to changing strategies and direction. Investors consider management’s ability to lead the company through such changes as well as any growing pains. Later-stage companies with proven track records and, more important, the capacity to provide an attractive salary, can attract better managerial talent; therefore, investors may place somewhat less weight on existing management and more on the company’s track record and business model. In all cases, investors know that existing management establishes its value by building a successful company, and that regardless of the value investors may place on a particular member of management, the management team as a group will be critical for the company’s continued growth.
Investors are mindful of co-investors. Some investors are sensitive to the identities of their co-investors. Large investors demand significant control and input in their investments. Accordingly, larger investors may worry if there are too many other co-investors or if there is another large co-investor which could lead to internal fighting and conflicts over control. On the other hand, most smaller investors understand that their role is generally a more passive one and that they will likely have to work with other investors, some of whom may have more control and influence over the company.
Focus on key management and company characteristics. Investors list “tenacity” and “openness to feedback” as key management qualities. Investors are also wary of persons who blame others for their failures or missteps. While a proven track record and traction are good qualities, investors place greater importance on a person’s ability to understand the company’s product and market, and demonstrate an ability to pivot, whether as a result of a changing environment or an unsuccessful business plan.