Which investor should you take money from?
- Elliott Wu
- Oct 19, 2013
- 2 min read
Picking the right investor to take money from is a lot like dating. You as an entrepreneur have to go out and court the right investor, but also find the right investor for you too. For angel investors, this can simply be a guy who is willing to invest and maybe can be convinced of your vision. This is MUCH harder for VCs. After all, when dealing with VCs, you’re generally talking about a lot more money, involving a lot more individuals. So how should you go about finding the right VC?
Figuring this out is why you need to do your own due diligence on the VCs you’re pitching to. It pays to know who you’re pitching to so you don’t end up wasting your time.
This list of questions is by no means comprehensive, but it will give you a good start on gauging a potential investor:
Does this investor:
Invest in a company at your stage / size?
Invest in gaming companies or in companies that provides your type of service (if you’re not a content producer)?
Invest in companies with that return time frame that you are looking at?
Have a SUCCESSFUL exit with a company like yours?
Have a general partner(s) who understands your industry lingo?
If half of the people in the room don’t understand your industry, you’re most likely wasting your time. You want to spend your time educating them on the opportunity, not on the industry itself. Make sure the people in the room speaking gaming!
Have general partners that you have a good rapport with?
Have general partners who can get excited by your idea?
Have people who would make good members on your board?
Have the capacity to handle the deal? This means three things:
The bandwidth: If they are already swamped with another deal, they are less likely to pay attention to you
Have the funds to invest? Obviously, if they’re tapped out, there’s no money to invest
Have time to invest? Most funds exist for 7 years, with it’s final years focused on exiting deals and making their money back. As a result, a fund that is nearing the end of its life is not a good candidate to ask for a risky investment
An investor who can fill most of these is more likely to be receptive to your idea, and won’t end up wasting your pitch time on explaining. In addition, a VC that matches better with you will also be potentially far more helpful for your company in the long run.
Remember, an investor is not just a piggybank; they are also your partner. Treat them as such and use whatever resources they can provide.
NOTE: When looking at these VCs, don’t just read what is on their website. Look at their actual investment history on websites like crunchbase.com or cbinsights.com for information. A lot of investor websites will claim interest in more sectors / stages just so they don’t miss opportunities, but are more comfortable with certain kinds of companies.
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