investors and entrepreneurs 2022 started on a bright note and optimistic as startups raised nearly $13 billion in the first quarter, the fifth-highest fundraising quarter on record.
But talk of a global venture capital setback has grown bigger and more widespread lately. It changed the startup landscape.
But the difficult economic climate has shown that startups need to accept the initial offer, settle for a lower valuation, or attract investors with different values and ambitions to their business. It doesn’t necessarily mean that. It is more important than ever that all parties come to the negotiating table with clear questions and expectations.
Here are three solid and fair questions founders should consider asking potential investors.
What value can you provide besides money?
It’s important to remember that VCs don’t have infinite funds. VCs are at the mercy of LP liquidity.
Most worthy investors demonstrate that they have more than just deep pockets of value, such as sector expertise, business experience, and global network. Founders should feel confident in proactively asking what investors have to offer, especially the networks and referrals that potential investors can foster.
There is a big difference between an email introduction and a clear handover to someone who has a deep relationship with the investor and is based on varying levels of trust. Many investors take pride in having robust and profitable contact lists, but not all referrals are created equal.
My advice is to articulate your commercial objectives and encourage potential investors to provide the names of the individuals or organizations whose impact you are looking for. introduced one to an $80 billion infrastructure company. We have developed a deep relationship with this company to set up pilots in many regions.
Referrals don’t just build connections. They should have a tangible commercial impact.
How safe is your cash?
It always amazes me how many founders believe that VCs are sitting on piles of cash ready to be distributed.
It’s important to remember that VCs don’t have infinite funds. VCs are at the mercy of LP liquidity. Therefore, it is wise (and necessary) for him to prepare answers to three main questions.
