Today I had a great conversation with a rising founder. One of the things we talked about was her experience working with investors who fight hard for founders behind the scenes. She thinks the right investor can be a game changer. I didn’t raise capital for CCAW and fought an uphill battle on many fronts. It was tough, but in the end, with a little luck, it worked out well. I wouldn’t change anything about CCAW’s journey, but I think she has a great point.
Founders unfamiliar with raising capital or the world of venture capital may not realize it, but good investors often add much more than capital. Here are a few examples:
- Portfolio peers – Professional investors have a portfolio of investments in many companies. Good investors will connect the founders of their portfolio companies so they can form a peer group and learn from each other.
- Elusive customers – Relationships are currency and investors know everyone. They often can open doors to help their portfolio companies land customers they otherwise couldn’t (limited partners in their fund, other portfolio companies, etc.).
- Experience – Investors are wise in the ways of entrepreneurship. They’ve been around the block many times and seen companies succeed and fail. Their experience can be invaluable to a first-time founder. The right investor can tell a founder what’s around the corner, helping the founder avoid land mines and serious setbacks.
I know a successful founder who raised a few million dollars for his startup. But here’s the catch: he never spent a dime of it. His company was profitable and he didn’t need to raise capital. He needed something else. He raised capital to gain access to experience and wisdom. He knew he wanted to build a huge company and therefore wanted people around him who had done just that. Yes, he gave up some ownership in his company, but he achieved (and far exceeded) his goal. His investors’ experience proved invaluable.
Raising capital isn’t right for every company, but when it is, choosing an investor who can add more than capital can be a game changer!