My name is Rick Gilles. I’m a strategist, innovator, and mentor for founders and funders in the startup and SMB ecosystem. Today I’d like to ask you a question: How can you find your ideal investor?
Are You a Buyer or a Seller?
In business, by definition, you are either a buyer or a seller. This is also true if you’re raising money for your company. You are selling if you are trying to launch or further grow a company or you need to add liquidity to a company. If you are investing your money to make changes in the world or trying to beat the stock market, then you are investing, and thus a buyer in the market of venture funding.
Who Is Your Customer?
In his book Disciplined Entrepreneurship, MIT’s Bill Aulet defines 24 steps to creating a successful venture. There is a reason why he starts with defining your customer. That’s because without a customer, without somebody to buy whatever it is you’re trying to sell, you can’t go anywhere with your business. This is also true with investors. You have to define who’s going to buy what you’re selling. When you are trying to fund a company, you need to think about your investor market with your investor as your customer. The more you put into clearly defining who you want to be as a funder, the better your chances of finding these people. Finding your hiking path without a compass won’t work well.
You may thoroughly believe in your venture and that it will bring wonderful solutions to the marketplace and will drive fabulous profits as a result. You should believe this if you are asking someone to invest in it. However large the investor market is—and it’s huge—you are not helping yourself by throwing your opportunity to anyone out there. You need to take the time to develop a clear understanding of who will buy your product, and in this case, that’s your company.
Segmentation Analysis of the Investor Market
We use market segmentation analysis on the investor market. For more information, Riley Rogers does a nice job of explaining investor categories within the investor markets as well as several approaches to go after them. After learning about the different types of investors, explore the type of investment you need and think through a segmentation analysis of the investor market. You can begin this by setting a goal for how much money you want to raise and from there you can determine the general type of investment you need.
Who Is Your Ideal Investor?
In order for you to define your investor market, you need to be really clear about what you’re selling. After that, you need to figure out who are your ideal investors because they’ve got to fit with the way you think and the way you feel about your company. Focus in on a few things: the type of organization, whether the investor is hands-on or hands-off, the financial depth of their organization, where they like to focus on products and services, the size of their initial investment and their follow-on investments. What are their goals in terms of return on investment and how risk adverse are they? Are they tied to a certain geographic location? How much do they want to get when the exit and when do they want it? Do they have other resources like an accelerator such as Y Combinator? Ideally you will create a mix of these factors that together define your investor according to who fits your needs and style.
Once both your venture and ideal investor are defined, then you can analyze the investor marketplace and find your ideal investor targets. There’s a couple of places where you can go but there are three I recommend you start with: AngelList, crunchbase, and the Cleantech Group. I hope this has helped you understand marketing to your investors a little better.
About Richard Gilles
Rick is the Managing Director of Barnraisers Group LLC. – A Portfolio Consulting Company. A serial entrepreneur and business consultant with over 30 years of experience, he has served as CEO/CFO/COO of multiple businesses, and as a consultant providing C-level management, business development, turn-around services, as well as new venture launches.
Over past decade Rick’s focus has been as strategist innovator and mentor for founders, managers, and investors in the startup and SME ecosystem. He has worked on over 100 companies [from North America, Europe, SE Asia, and India] in 25 different vertical markets. A few of his specialty areas are: finance, national security, health, artificial intelligence, cleantech, biotech, & SaaS.
He has developed financial and business systems for an assortment of company types with as many as 26 profit centers. With his business development and funding hat on, Rick has facilitated deals ranging in size from $100,000 to $12 billion.
Office: 617-286-4991 Cambridge CIC