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For first-time founders, the pressure to get funding is greater than for more experienced people. These feelings are completely understandable, because the choice of your first investor has a significant impact on the long-term success of your company.
So what should your first investor be like and how do you choose them? Here are five must-have qualities to look for in your first investor to lay the foundation for a strong and mutually beneficial partnership that will support your startup's growth and success in the long term.
1. Shared enthusiasm for your company’s vision
Finding an investor who shares your passion and enthusiasm for your startup's mission and values is paramount. Look for someone who aligns with the problem you're solving and the impact you want to make.
When your investor is truly excited about your startup's goals, it fosters a shared sense of commitment and dedication. This alignment fosters a strong connection and encourages joint efforts to achieve your goals.
A successful mobile game publisher coming from the gaming industry, where GEM Capital is a respected investor, is unlikely to be thrilled to support the development of a new AAA shooter for PC and consoles. It's just a matter of finding the right solution.
A good partner understands and aligns with your startup's long-term vision and goals. This goes beyond financial support; it requires a deep understanding of where you want to take your startup. Look for someone who can provide strategic insight and advice that aligns with your growth trajectory.
Related: 5 surprising qualities investors look for in a winning team
2. Extensive network of useful contacts
An investor with a solid network can give you access to resources that are critical to the advancement of your startup, including strategic partners, top-notch talent, reliable suppliers, and efficient distribution channels. By leveraging these invaluable resources, your startup will gain a competitive advantage and lay a solid foundation for long-term success.
Look for an investor who can introduce you to influential people in your industry or target market, whether they be industry experts, thought leaders or potential customers. By connecting you with key contacts, your investor will enable you to gain insights and capitalize on new opportunities.
Related topics: The most important characteristics of patient and successful investors
3. Knowledge and extensive experience
Look for an investor with a proven track record of investing. Their past success shows that they can identify promising opportunities, overcome challenges and generate attractive returns. Working with such an investor will give you access to valuable insights and advice.
It's best if they also have deep industry-specific knowledge and insights relevant to your startup's field. Their familiarity with market trends, new technologies, and industry dynamics can give you a competitive advantage.
By leveraging their expertise, you can better understand your target market, refine your product or service offering, and develop effective go-to-market strategies. Many investors like to talk about their superpowers, so don't hesitate to ask what sets them apart from other funds.
4. Transparency, mutual respect and reliability
An investor who values transparent dialogue and appreciates your insights lays the foundation for a solid partnership. Transparency builds trust and empowers founders to make informed decisions. Knowing that their investor will act honestly and with integrity ensures that goals and expectations are aligned.
In turbulent times, you need the helping hand of a wise mentor who shares the same risks as you, not a prosecutor who is only interested in his paycheck.
Feedback from an investor's portfolio companies is one of the best signs of trustworthiness. A reliable investor fulfills its commitments and stands by the founders in good times and bad. Consistency in actions and words increases credibility and strengthens the foundation of trust in the relationship between investor and founder.
Related: 4 Things Investors Really Look For in Financial Forecasts
5. Ability to make long-term commitment
An investor who remains open to overcoming unforeseen challenges and changes in direction is a model of resilience. The willingness to support you through different phases of growth and development shows a commitment that goes beyond financial support. It ensures that the startup can weather uncertainties and effectively exploit new opportunities.
Founders should always look for new funding opportunities as this also builds the confidence of existing investors. However, in a difficult situation, an investor who has the financial means to support the startup's evolving needs instills confidence in its future development.
When making decisions about investors, always research how confident they are in standing on their own two feet. For example, end-of-life-cycle funds may not have sufficient funds to continue supporting the company.
As you can see, choosing the best investor for a startup is not about aimless muddle or sheer luck. A founder can use certain criteria to evaluate potential partnerships, eliminating doubts and finding the best match for long-term success.
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