Right now Venture Capitalists are looking for the right startup opportunities to invest in – and they’re not all finding what they’d hoped for. In this article we’ll explore today’s landscape of early stage companies. We’ll explore the need for better connections and relationships between investors and early stage companies, and the importance of a strong network of advisors and board members to make key introductions to funding resources along the way.
Understanding Startup and Early Stage Funding
The startup industry has seen a lot of changes in the past few years. The funding landscape has shifted and now we have more investors than ever before. Investors are not just looking for companies that can generate revenue or profit, they want to invest in the next big thing.
Some of the most popular and successful investors include:
- Angel Investors: These are wealthy individuals who fund startups with their own money. They typically provide less funding than venture capitalists, but they offer more hands-on assistance and mentorship to the founders of these startups.
- SPACs: These are Special Purpose Acquisition Companies, which are publicly traded firms that buy companies with the intention of turning them around and then selling them off for a profit.
- Venture Capitalists: These investors provide capital.
A startup can also raise capital from private equity firms, banks, and other sources. Some startups may not need outside funding because they have enough money to fund their operations from revenue or from personal funds. Crowdfunding sites like Kickstarter and Indiegogo, and business accelerators are also common funding sources, either for startups or even for product launches with established companies.
The Right Relationships for Startup Funding
A startup is at the mercy of the financial and banking relationships it has. The right board members, advisors and introductions can make all the difference in a startup’s success.
If you are a founder or an aspiring entrepreneur who is looking for funding for your startup, then you need to find those who have connections with investors and bankers. You also need to find those who can introduce you to these people or at least provide some advice on how to go about it.
These relationships don’t only provide insight for financing. They’re also powerful avenues for creating hiring opportunities, finding the right board members and helping to establish leadership teams. Especially when the labor market is tight, there are more opportunities than there are candidates. Startups are having trouble finding the talent that they need at a cost they can afford to preserve their runway.
The Importance of Your Network For Startup Resources
Establishing strong, beneficial relationships should start with cultivating the potential of your existing network, such as university incubators and resources like Y Combinator that can make introductions to additional advisors, venture capitalists, angel investors and others. The key is to actively build your network and develop networking skills to get introductions to potential partners and create a valuable network of professionals. Pro tip: Tinkering on LinkedIn should not be the extent of your “networking”. As discussed – you need to get out there to make things happen, or hire people who can.
Finally, the entrepreneur needs to have a strong network that includes people from different backgrounds – not just other entrepreneurs or founders. This way they can get introductions from people in diverse industries who know the right people in high places.
Trust Your CFO and Other Advisors
At ProCFO Partners we have dozens of CFOs who enjoy dozens of key relationships in our networks. We put these to work for our clients. This is an advantage for us as fractional or part-time CFOs, but these are characteristics to look for in the advisors on your team, financial or otherwise. Importantly, the right parter also points out risks and can help cover your blind spots. Our CFOs are prepared to have difficult conversations with business owners and founders, because part of our job is to help your boat avoid icebergs. This is another key to relationship building – forming partnerships with people you trust that, with their expertise and experience, can help head off potential issues.