How to Attract and Work with Investors
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.