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Investors and entrepreneurs Startups raised nearly $13 billion in the first quarter, the fifth-highest quarter in funding on record, starting 2022 bright-eyed and optimistic.
However, talk of a global venture capital pushback has become louder and more widespread of late. It’s clear that money isn’t flowing as freely as it used to, and that’s obviously changed the landscape for startups looking to build and scale their ideas.
However, a challenging economic climate does not mean that startups should accept the first offer that comes along, for a low valuation, or to bring in investors with specific values and aspirations for the business. Now more than ever, it is important that each party comes to the negotiating table with clear demands and expectations.
Here are three tough but fair questions founders should ask their potential investors.
What value can you provide besides money?
It’s important to remember that VCs don’t have an infinite pot of money – they’re at the mercy of LPs’ liquidity.
Most investors worth their salt show that they come from more than just wallets – values like sector knowledge, business experience or international network. Founders should be confident in actively asking about what an investor can offer, especially what networks and portals can facilitate.
There’s a big difference between an email-facilitated introduction and an overt offer to someone whose relationship with the investor is deep and at several levels of trust. Many investors pride themselves on having a strong and profitable contact list, but not all portals are created equal – a LinkedIn profile rarely reflects the depth and quality of an investor’s network or expertise.
My advice is to be clear about your business goals and pressure investors to provide names of individuals or organizations that can make the impact you want. For example, we recently introduced one of our portfolio companies to an $80 billion infrastructure company where we have developed a deep relationship to establish pilots in multiple regions.
Portals don’t just create connections; They must create a tangible business impact.
How safe is your money?
It always amazes me how many founder VCs believe they are sitting on a pile of cash ready to be distributed at any moment.
It’s important to remember that VCs don’t have an infinite pot of money – they’re at the mercy of LPs’ liquidity. So it’s logical (and important) to find answers to three key questions.
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