The right investor provides much more than just money. They are someone to talk to, someone who can open doors and build bridges. Important advice for technology start-ups in search of an investor.
Eduard Andrae has made it – he has found an investor for his idea. The 50-year-old founder of trusted-blogs.com can now concentrate fully on his website. "I had a look around online portals and visited events for entrepreneurs to find out important information. At the same time I was able to attract the attention of potential partners," says Andrae. He believes it is important that the connection between investor and entrepreneur is based on more than just money: "There has to be a good fit on a personal level so that a start-up can benefit from the investor’s expertise as well."
Carsten Meyer-Heder thinks so too. The managing director of Bremen-based digital agency neusta, and investor in trusted-blogs.com, has plenty of advice for start-ups on what they need to look out for in their search for an investor. "Entrepreneurs should firstly know what they want – a long-term partnership or a short-term cash injection" advises Meyer-Heder. An investor from the same sector is always helpful, as not only can they provide vital business expertise, but they will also know the market and can make it easier to access it. They can provide help with making useful contacts and accessing networks – both important success factors for young start-ups. They can also help with finding specialist staff, as not every start-up will have experts for every department, e.g. in technology, marketing, sales or project management. "At the end of day the chemistry must be right, which is why I recommend finding a family business, rather than a typical venture capital investor," Meyer-Heder explains.
There are black sheep among investors, too, so plenty of background research and careful studying of contracts are a must once the initial euphoria has passed. Especially when it comes to the amount of equity in the company that the investor will receive in return.
"There are many types of investors – business angel, venture capitalist, accelerator and business incubator. Each type has its advantages, which is why entrepreneurs need to do their research," says Kai Stührenberg from Bremeninvest. A change of perspective can be helpful, too: why is an investor interested in my idea? Which factors might win them over? These questions can be decisive during the pitch. "The point is to present yourself not as someone looking for a handout, but more as a business partner offering opportunities – and that has to come through in the pitch. That’s why a start-up should leave the question of finance until the end of the presentation – and make reasonable demands, of course," Stührenberg adds. He agrees with Bremen-based investor Meyer-Heder on the best way to get a pitch: through somebody who knows the investor, i.e. through networks. And the best way to build these up is through immersion in the local start-up scene, attending events or asking an economic development agency.