Why startups need investors

Why Your Startup Needs Investors

October 11, 2015
1,767 Views

Far too often, after they have struck it big, entrepreneurs complain about the burden of investors and the stressful phone calls with key funders during the ‘early days’.

It’s funny how quickly the tide turns. In 2008/2009 every founder in Silicon Valley was desperate for investors. Now, it seems sentiment has drastically changed. We read about the dangers and hassles of bringing investors and venture capitalists into startups way too much these days. It seems as if the media tries to portray investors as relentlessly demanding corporate pigs.

Sadly, entrepreneurs often complain, after the fact, that they didn’t receive a high enough valuation early on and if they could do it all over again, they’d leave investors out. This is prima donna shit. Fact is, investors are great. They bring a ton of value other than just capital. And more often than not, without them most startups wouldn’t get off the ground.

I want to share 5 keys investors bring to your startup, aside from simply money.

 

5 Reasons Why Your Business Needs Investors

They grow your network rapidly: Most seasoned investors in startups are connected within the world of venture capital and entrepreneurship. When they invest in startups, they do so with the intent to help the company grow; be it bringing in future investors at higher valuations or opening doors to contractors, joint ventures and commercialization opportunities. Bringing in strong, experienced investors adds depth to your rolodex. And you can’t build a startup without having a large network to draw from.

 

Keep you accountable: When there is other people’s money on the line it has a way of keeping you up at night and hungry to tackle problems right away. As a founder, you’ll find yourself in regular communication with your investors, which means they’ll be asking for informal progress updates. Investors have little time for excuses, and they can smell bullshit a mile away. If you’re not progressing as planned, they’ll know and likely call you out on it. This is a very good thing.

 

Idea generators and counseling: Often times, founders need some pointers when they hit a fork in the road. Many venture capitalists have been in your shoes, learned from trial and error, and can give you incredible advice for success. And they’re more open to sharing their trade secrets when it’s their money on the line in your company. If they weren’t invested in your company they’d likely be reluctant to share trade secrets and give you their time (free of charge).

 

It’s much more fun: Sure, it’s great when you succeed as a sole proprietor. But when your business succeeds and positively impacts investors by enriching them both emotionally and monetarily, that’s one of the true marvels of entrepreneurship. It’s no fun popping champagne alone.

Quicker expansion: It’s the main reason entrepreneurs seek investors. Outside capital allows startups to expand rapidly. This, of course, can have its downfalls, but when you do your homework it can make all the difference whether you succeed or fail.

Commerce is moving quicker than ever. And self-funding an innovative idea that requires R&D or product development rarely works unless you have deep pockets. Speed matters in the startup world. Investors can help with that.

 

Respect the money, but understand that well sought out investors will bring much more to your business than just capital. They’re a brain bank of ideas; and in most instances, investors were once, and may still be, entrepreneurs themselves. They’ve successfully walked in your shoes, so don’t be afraid to bring them on board.

If you haven’t already, I recommend reading the articles below to learn about what to look out for when seeking investors:

Who is Your Lead Order?

Beware of ADD Money

Never Partner With Someone in Business Just Because They Have Deep Pockets

 

Stay hungry,
Aaron Hoddinott signature

Aaron

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Like all of you entrepreneurs and investors out there, Aaron has been in the trenches. He is the founder of an influential online media and PR company. From oil wildcatters to mining prospectors, tech gurus to medical doctors, and even celebrities, Aaron has helped market and expand brand awareness for a diverse range of publicly traded companies ran by entrepreneurs from all walks of life.

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