One needs to be very careful while on boarding an investor. Divorcing a wife or husband is easier than divorcing an investor, obviously you don’t want to be on the other end to see which puddle is muckier! Your relationship with your investor is a sacred affair- one where you want to be in the long haul, you both parties’ matter of factly. So, clarity of clauses in the agreement is of paramount importance.
1) Brand name and Domain expertise
Every Investor brings in the big bucks. Well, that’s why they are called Investors! but someone who brings in their own brand persona and experience on the field is the real kohinoor here. Being able to utilize his brand to gain positive traffic towards yours is the cherry on the cake. Moreover, sometimes investors can contribute by offering minor tweaks that you may have not thought of and it could prove to be just the change required to catalyse the dynamics of your business model. They can lend their domain expertise which can help you make traction and add tons of value with fresh perspective.
2) Long term/ short term
You have to be a little wiser here. Analyse the investor. Is he in it for the long term or short term? Many investors are looking for a high growth model which should generate whooping returns in a short span of time. However, you as a Founder know businesses are not built overnight and take years of consistent hard work, dedication and untiring commitment. Watch out for investors wanting to cash in on your success only for the short term. Do a mentality check!
3) Aggressive spending norms
Some investors want a start up to expand aggressively irrespective of the market condition. Whereas, business operators like to expand in depressed economic situations when assets are available at discounted prices. Investors should not be anxious about the utilization of the funding. The expense of funding should be left to the discretion of the business operators who know the ground reality well.
4) Great connections
Yes, we’ve established that money is the crux here. But what if it’s laced with opportunities? Investors with well established connections in the market are your shahi-dum-biryani royale style! Simply because connections are not built over time. Trust is built over years. Decades of incredible investment is required to win the confidence of the business stakeholders. If one deal opens to you to these connections then you should go for it.
5) Financial strength
How well is the investor thinking of going down for? How does his financials look? What are the other ventures funded by this investor? Are they doing well? Has the investor been able to generate efficient returns from the other investments? Is he facing any financial tension? Is he capable of funding further rounds? etc questions need to be asked. Is Investor carrying ammunition, or have already fired and are left without any.