Well intentioned illusions
The Startup world is home to many well intentioned illusions. One of these is the concept of "investor ready." This apparently attractive phrase is dangerous because it misleads about investor priorities, it misunderstands the relationship between investors and companies and it misrepresents the role of advisors.
Let me explain. If you search the Internet you will find literally thousands of blogs and articles by angels, VCs and investors of all types setting out their investment priorities. Investor ready is never on the list. There is a very simple reason. Investors want to invest in a great business. The common factors - team, product/ market fit, growth potential etc - are all about being a great business.
Investors and Startups need each other
Investor ready also implies, even assumes in some cases, that Startups are supplicants aiming for the grace and favour of investors. This is wrong. Investing in a Startup is a partnership. The investor has scarce resources of money and expertise but the Startup also offers something rare, great people and an innovative business. Investors need Startups as much as Startups need investors.
A few things you need to know
A mini industry has grown up around matching these needs. If you are a Startup looking for money, you will encounter this sector of the economy sooner or later. Here are a few things you need to know:
Hold onto your dream
The most essential thing is not to lose yourself and your business in the “investor ready” process. I have seen many pitches and business plans (which is just another pitch remember) refined and improved by expert advisors which are designed to answer every question in the book. Unfortunately this never works. Once investors see the pitch sooner or later they will ask the question about the business fundamentals that is not in the book and the founder will be exposed. Your job in the investor ready process is just another pitch. It is not to change the market, the product or the revenue model to meet someone else’s expectation.
Securing investment is an exciting moment for any business. Remember you are an equal partner in that investment and what you bring is the idea and the passion. Lose these and the investment will be and for you and the investor. Keep them and we will all have fun.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.