Stammtisch #46 focused on the question, ‘How to find the RIGHT investor?’ because as it turns out, getting it wrong is easier than you might think. So here is what you should consider when looking for an investor.
This time we were joined by Tobias Homberger CEO, myclubs, who as a lone founder guided his company through currently 4 rounds of investment and growth. Joined by Lisa-Marie Fassl managing director, Austrian Angel Investors Association (AAIA), a role which focuses on finding the right match between startup and investor. And finally, Oliver Holle founder and CEO, Speedinvest, bringing not just years of international experience to the discussion but a holistic approach having being on both sides of the bargaining table.
Your first investment doesn’t need to be an investor.
No, we’re not going to tell you to get in touch with family or friends – the infamous uncle’s investment – but you shouldn’t overlook government support. Make use of the big selection of public grants for startups – after all the state doesn’t take equity! Austria is one of the only governments to offer this – use it!
Pitch your startup as much as you can. Building a network is how you will most likely find the right investor.
Don’t take the money right away. Austria offers many opportunities to gain exposure before investment and it’s something the AAIA is looking for. There’s Pioneers, WeXelerate and Talent Garden. Going to these pitching events and contacting public grant institutions are good moves even if it is 6 months before you need investment. Getting the idea out there and stimulating interest is important.
Avoid the less well known pitfall of incorrect share distribution.
What is a red flag for investors? If at Seed Stage there are already clear problems with equity, often due to many non-operational shareholders, chances of further investment are slim if not impossible. Each investment builds on the previous one and the next investor will ask for more equity. The Startup will become non-fundable at some point as the return needed from equity will never be seen. In other words, don’t give 40% to a family member who lent you some office space for 3 months’ – it’s happened before.
What not to look for in an investor.
While a friendly and supportive investor might boost your confidence, it’s not going to help you when it comes to further developing your product. An investor shouldn’t be nice, they should be critical and challenge what you’re doing.
Smart money vs dumb money
Always consider what an investor can do for your startup besides the money. While some investors can provide you with a useful network or experience, others might cause internal problems like having an entirely different vision for your startup down the line.
What social network is best to reach investors? In a nutshell – NONE, personal contact is important.
If you want to contact investors, going on their actual website is one of the best ways to make the initial contact if you don’t have anybody in your network. The AAIA also promotes investors and their main function is to help with matching investors and startups – again their website is your best option.
Don’t believe you made it just because you scored an angel investor.
A common mistake. The first investment is really just the first battle. As investments increase more people will be interested and subsequently involved. Making sure that a return of over 100% on the initial investment can be achieved is hard work. Raising follow-on financing from initial investors, finding other investors to bring into the venture and maintaining quality and the brand are key.
In summary: A good network is important when finding the right investor. Focus on building the network, getting exposure and understanding exactly what you need the investment for in the short term, investment is done in stages for a reason. See you at the next Stammtisch!