How to At­tract and Work with In­vestors

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: San­tit Ji­ra­wongkraisorn

For many en­trepreneurs, in­vestors are cru­cial part of their busi­ness be­cause their startup or busi­ness needs fund­ing to sur­vive and grow. So, en­trepreneurs should spend a lot of time net­work­ing and build­ing re­la­tion­ships with in­vestors. En­trepreneurs should keep in mind, though, that find­ing in­vest­ments is not a means to an end. Their pri­mary fo­cus should al­ways be grow­ing their busi­ness in a sus­tain­able way and find­ing in­vestors should just be part of this goal.

Prior to co- found­ing Lalam­ove Thai­land, I was re­spon­si­ble for launch­ing Uber in Manila and Bangkok, so I was fa­mil­iar with work­ing with star­tups. Be­fore that I worked as an In­vest­ment Di­rec­tor at Dragon Cap­i­tal Group’s Mekong Brahma­pu­tra Clean De­vel­op­ment Fund, a re­gional pri­vate eq­uity fund that in­vests in re­new­able en­ergy and clean de­vel­op­ment projects in var­i­ous coun­tries in Asia. So, I was knowl­edge­able about dif­fer­ent types of in­vestors and fund­ing be­fore launch­ing my busi­ness.

I per­son­ally think it is im­por­tant for busi­ness own­ers or founders and the in­vestors to have a good work­ing re­la­tion­ship. In­vest­ment is like a mar­riage and once it comes in, it is not easy to get out of, so it is cru­cial to have a re­la­tion­ship where both par­ties ben­e­fit and sup­port one an­other. The re­la­tion­ship part must be ce­mented be­fore money ex­changes hands to min­i­mize in­vest­ment risk as much as pos­si­ble. I have seen in­vestors de­value or even de­stroy a com­pany. Be­low are some tips I would like to share on how to at­tract and work with in­vestors based on my ex­pe­ri­ence.

1. DO YOUR HOME­WORK

It is im­por­tant to do your home­work be­fore meet­ing with in­vestors. Make sure you know the in­vestor be­fore ap­proach­ing them, as dif­fer­ent funds have dif­fer­ent man­dates based on in­dus­try, in­vest­ment size, stage of in­vest­ment, etc. Study the type of in­vest­ments your po­ten­tial in­vestor has made and if pos­si­ble speak with com­pa­nies the in­vestor has in­vested in so you un­der­stand how they work. You also want to make sure that the in­vestor you are speak­ing to is not work­ing with your com­peti­tors in order to pro­tect the con­fi­den­tial­ity of your busi­ness. I have seen in­vestors who turned around af­ter re­ceiv­ing your pitch and built the very same busi­ness that you pitched to them. All good in­vestors will up­hold their ethics on this front. So, look into the rep­u­ta­tion of in­vestors you talk to; it is part of do­ing your home­work. If the in­vestor has a good rep­u­ta­tion, there is no rea­son for you to not be trans­par­ent with him or her.

2. BE YOUR­SELF

Fo­cus on be­ing your­self and be­ing trans­par­ent. It is fu­tile to try and hide any­thing be­cause both the strengths and the weak­nesses of your busi­ness will be re­vealed through the due dili­gence process. That’s what the due dili­gence process is partly de­signed for. Pre­pare your pitch deck and prac­tice pitch­ing. Make sure you sound nat­u­ral and not canned. A pitch is a con­ver­sa­tion, not a one- way pre­sen­ta­tion. Re­lax and be pos­i­tive. Be your­self and let your­self shine.

Be­ing trans­par­ent doesn’t mean you need to re­veal all your feel­ings to the in­vestor. It doesn’t mean you will be best bud­dies with your in­vestor, ei­ther. Keep it pro­fes­sional. Fo­cus on strengths, ac­knowl­edge busi­ness short­com­ings and fo­cus on solutions. In­vestors value self­aware­ness highly be­cause it shows ma­tu­rity and short­com­ings are usu­ally not a deal- breaker. Af­ter all, you are ask­ing for fund­ing to im­prove and strengthen your busi­ness for every­one’s ben­e­fit. I sug­gest to fo­cus on be­ing pre­sentable and per­son­able, while at the same time be­ing as pro­fes­sional and as trans­par­ent as you can be.

In­vestors con­duct due dili­gence when eval­u­at­ing a po­ten­tial in­vest­ment op­por­tu­nity. You should look at this as a pos­i­tive thing, be­cause due dili­gence is what in­vestors rely on to an­a­lyze in­vest­ments. Good in­vest­ments come from do­ing good due dili­gence, and in many ways the abil­ity of the in­vestor to make good

in­vest­ments ( which af­fect their rep­u­ta­tion) di­rectly cor­re­lates to a well thoughtout due dili­gence process. Good due dili­gence may also re­veal weak­nesses you haven’t thought of be­fore and help you get your busi­ness on the right track. Re­mem­ber that you are eval­u­at­ing in­vestors too, just like in­vestors are eval­u­at­ing you.

3. THERE IS NO ONE- SIZE- FITS- ALL AP­PROACH TO IN­VESTORS

There are many types of in­vestors: an­gel in­vestors, VCS ( ven­ture cap­i­tal­ists), strate­gic in­vestors and pri­vate eq­uity funds, among oth­ers. For Lalam­ove, we first ap­proached dif­fer­ent types of in­vestors and then set­tled with Mind­works Ven­tures, a Hong Kong- based fund.

The key is to find a good match in terms of in­vest­ment goals and shared val­ues. You want to work with an in­vestor with whom you share mu­tual re­spect and feel com­fort­able with – some­one who shares your pas­sion, com­mon per­sonal and busi­ness val­ues, and com­ple­ments your busi­ness, some­one who can make con­nec­tions for you and even po­ten­tially raise more rounds for you. An in­vest­ment is a long- term re­la­tion­ship, as it is not easy to pull out of. I take as it as a sign of huge trou­ble when the re­la­tion­ship is on shaky ground, so good com­mu­ni­ca­tion is also es­sen­tial. In­vestors look for dif­fer­ent things de­pend­ing on the type of in­vest­ment they want or are man­dated to make. If the in­vest­ment is strate­gic, then prof­itabil­ity might not be the im­me­di­ate goal. If it is fi­nan­cial, then prof­itabil­ity must be the end goal. Prof­itabil­ity can also come from exit, not just div­i­dends. Prof­itabil­ity is im­por­tant even for strate­gic in­vest­ments since in­vestors will not carry big, sus­tained losses, un­less it is in the re­search field. But even so, it means re­turns are a longer way com­ing, but still com­ing. This means in­vest­ment is in­vest­ing in some­thing for re­turns, some­times more about money and some­times less so, but profit is im­por­tant none­the­less.

You should also re­mem­ber that some­times it is not your fault that the in­vestor didn’t in­vest in your com­pany. It may be that in­vest­ing in your com­pany didn’t fit the fund’s man­dates, and the in­vestor was just do­ing his job to source deals. Of­ten, if an in­vestor likes your busi­ness, he or she will re­fer you to other in­vestors that might po­ten­tially be in­ter­ested in in­vest­ing in your busi­ness. Some­times they will even re­fer you big clients.

4. DON’T BE DIS­COUR­AGED. FIND­ING AN IN­VESTOR DOESN’T NEED TO BE STRESS­FUL.

If an in­vestor says “no,” don’t get dis­cour­aged. Take down notes on ar­eas you need to im­prove. I have made mis­takes too by be­ing overly- pre­pared and sound­ing ro­botic. Some­times it might take a lot of meet­ings to find the right in­vestor for you, so don’t give up. In­vest­ment is about proven fi­nan­cial re­sults, so if your busi­ness per­for­mance is good and you are con­fi­dent about it, then in­vest­ments will come. There­fore, never lose fo­cus on build­ing your busi­ness.

Fo­cus on build­ing your busi­ness sus­tain­ably and prof­itably. Re­mem­ber that in­vest­ment should be about ex­pand­ing, not just sur­viv­ing. Get­ting an in­vest­ment just to sur­vive is not a good thing, be­cause it is about pro­long­ing the life­line of your busi­ness. If your busi­ness shows good re­sults, in­vestors will come to you, and that’s a much bet­ter position to be in than you seek­ing them out. I un­der­stand that a lot of times in­vest­ment is about sur­vival, es­pe­cially for star­tups. This is ok too, as long as your busi­ness shows good re­sults.

As an en­tre­pre­neur, you should al­ways be able to adapt and pivot, al­ways learn­ing. Give your­self enough time to thor­oughly plan and ex­e­cute fund rais­ing, and take your time to vet in­vestors.

San­tit Ji­ra­wongkraisorn is Re­gional Di­rec­tor - City Op­er­a­tions at Lalam­ove. He can be con­tacted at info. th@ lalam­ove. com.

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