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Startups, here are few things you should not do while looking for investors

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When you are in need of capital then convincing your investors is the matter that must be given utmost priority. And you definitely don’t want to ruin such an opportunity. The following things need to be kept in mind while raising funds for your startup.

You might think that raising a lot of money is the best way of starting a venture but that is not correct. Do not be tempted to make a comfortable launching pad for yourself. Even though too much money might seem to make everything fluent for you but when you have fewer resources then you learn the art of capital efficiency. The crucial thing is not how much capital you have with you, but how well you utilize your money. There is hardly any need to hurry when you are trying to establish a successful business. Slow and steady wins the race.

Things one should not do while looking for investorsIt is of no use approaching an investor who has never before invested in a venture of your category. There are many disadvantages that you will have to face. You have to convince them every time of your ideas. They might develop unreasonable demands that will adversely affect your startup. When the person has no experience in your field he will not be able to provide you with support, advice or adequate encouragement. Everyone needs an investor who can actively contribute to the startup as part of the team.

However, if an investor has invested in any rival company then it’s safe to steer clear of his way. There will be unnecessary clashes in the company. Your growth might be hindered and your interests given second priority due to the other startup. Proper attention and funding may not be provided.

Things one should not do while looking for investorsNever meet an investor before doing your due homework. It is essential that you research on the background of the investing company who is funding your startup. Learn more about the type of companies they generally invest in or who exactly are the people who are doing your investment work. If you are not familiar with the intricacies of your investor’s work then it might be troublesome when you are interacting with them. Gather more information from people who have backed from the investors.

Things one should not do while looking for investorsDo not take the meeting to be a joke. The first time you are meeting an investor it needs to be serious and briefly efficient. You need to answer their questions correctly and in case you do not know an answer be responsible enough to find out the answer later. This is the time when you need to prove to the investors that your startup has the capability to be the next big thing.

Be sure to do the necessary things and you will earn respect and value from potential investors for your business.

Engineer by chance and writer by choice.. Reading is one of the basic necessities that keeps me alive.. Engaging and easy to get along with..I love making creative doodles and cartoons

  • Nilesh Trivedi

    I’m a bit confused about what exactly are you trying to convey in this article. That a startup should take investor funding or not, or that you should take funding but research your investor or that you should take the funding but be careful. Your initial point about not looking at ‘funding’ as the primary goal of startup’s existence is well worth a discussion.

    Investors hardly (I actually do not know of any VC or Angel for that matter) who would go around investing in competitive companies. VCs are actually prohibited by their fiduciary responsibility to their LPs w.r.t the process they follow in finding target companies and investing in them. But let’s assume that a VC does end up investing in two competing companies. Why would they do so ? Can you give me a credible reason for them to do so ?

    • http://www.startcup.in/ Niranjan Yadav

      There can be many aspects from an investor’s point of view to invest in two different baskets (2 different companies) having same content (products in the same niche). Firstly, investor can merge the baskets to make a bigger one. Other view can be such as – Investor is playing a safe game by investing Rs.5 in each basket, rather than investing Rs.10 in just one basket.

      • Nilesh Trivedi

        Professional investors don’t do that i.e invest in competitive companies to spread the risk around. They diversify their portfolio but they almost never diversify across competitive bases of their investments. I am a VC and I don’t know of any other VC who would do that either.

        • http://www.startcup.in/ Niranjan Yadav

          You should diversify. You want to invest in different sectors, and you want to invest in more than one company in a sector.

          For all the predictions and models, there is an unpredictable random element, and if you buy both companies and one of the companies announces tomorrow that its CEO is an alien from Mars, then your whole portfolio won’t be crushed.

          Most of the companies I follow tend to follow economic trends more than competitive trends. One company doesn’t do that much better by stealing customers from the other. A company does better when the sector is hot or when the company finds a way to expand the market.

          • Nilesh Trivedi

            You probably don’t understand the VC investment model. Unlike hedge funds or other asset allocation models, alternative investors have a fiduciary responsibility about the process and strategy of how they invest. It is not CAPM. The reason they can’t do that because they have an obligation by virtue of the termsheet parameters laid out at the time of investment. You diversify, but you do not diversify taking competing position in your investments. You diversify across sector, industry verticals and adjacent players. You diversify knowing that company’s A hole can be plugged by company B’s product.