Why speak with investors when you’re not raising money?
It is obvious why to speak with investors as you are gearing up for a fundraising round. Very few people get money handed to them without even asking. But is there a reason to talk to investors even when you’re just starting out and still defining your product and team? In other words, should founders speak with investors even before they start raising money?
My opinion is that there are clear reasons to do so, with investors who can bring value with a conversation.
Validation – especially if you are at an early stage and are working through your idea or finding the right team, you could get good perspective from investors. Keep in mind that investors meet tens of founders a month and could provide their perspective on the market, competition, the need, people you may be considering as co-founders, and market timing. They might point you to a go-to-market challenge you have not considered, a competitor you have not encountered during your research phase, or a niche within the area you are looking at that might be easier to initially conquer.
Expand your reach – it will not happen 100% (and probably not even at 50%) of the time, but each meeting may lead to your next customer, partner or employee. Most investors have solid networks, between their LPs, portfolio companies, and entrepreneurs they’ve met over time. They might be able to connect you with someone who can add tremendous value to you and your company.
Building the relationship – no matter at what stage you are of building your company, if you are not raising at the moment, you probably will at some point. When you do, it will be easier to turn to investors you already have a relationship with – you will already know each other and have figured out if you have mutual chemistry to build a long term relationship. They know your idea and plans. They can quickly understand the progress you have made. Having this previous relationship can cut your fundraising time and keep you focused on running your business. It is also an opportunity for you to get a sense whether you enjoy being with the VC and if you feel they can give you good advice at strategic moments in the future.
Practice makes perfect – you can never pitch your company enough. You never know what questions people will have or what parts they do or do not understand. Don’t be alarmed if an experienced investor asks tough and challenging questions, it will only get you better prepared for your next conversation.
Having said all of this, make sure you spend your time with the right VCs. You should search out investors that have invested in companies and founders that you admire and invest in stages that are relevant for you. To state the obvious, investors that have helped build and scale some of the most successful companies in Israel, will probably give you the best advice and guidance. Just make sure they are not invested in one of your competitors.
So if someone offers you an intro or coffee – that hour you spend getting to know them may be rewarding now or in the future.
Maya Pizov is a Partner at VC firm Amiti
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