The most important aspect of seed-stage investing is trust and relationship built between the founders and investors.
I recall reading Mark Suster’s blog Invest in Lines, Not Dots early in my investing journey and it resonated significantly.
The crux of the blog is that Mark recommends that founders meet with investors early to ask for advice, share their plans and show them what they actually achieve prior to asking for capital as part of a funding round. Essentially, instead of trying to win over investors with one interaction, stay on their radar and demonstrate that you’re heading in the right direction.
From the investor perspective, this advice makes a lot of sense. As a seed stage investor, we’re embarking on a long-term journey with our portfolio company founders – generally between 5 and 10 years. There will be highs and lows, but it is important that the relationship is solid throughout and that there is significant trust between the founders and their investors.
Sometimes, it's about putting in the work
The reality is that it takes time to build that trust. It’s a relationship akin to a marriage and without getting into a long-winded analogy, I’ll just say there’s a reason why most of the “marriages” on Married at First Sight don’t work out (okay, there’s more than one reason but you get my point).
Over the years, I’ve shared the advice around how we invest in lines, not dots to countless rooms full of founders. Each time I see many heads nodding in agreement, but frustratingly, I’ve had less than a handful of founders reach out to genuinely ask for advice well in advance of a capital raise.
I realise that, like most advice, it’s easier said than done, especially at the seed stage. Most founders don’t have a lot of time before they need capital and they’re already stretched to capacity trying to get their business up and running. However, making time to ask for advice from people who are willing to help is an investment in the future of your business.
Meeting investors before you’re ready to raise capital gives them the opportunity to get to know you – not just as a founder – but as a person.
For me, it helps me to:
- Understand why you started your company and what really motivates you as a leader.
- Get a sense of your skills and figure out if I can connect you to someone who can assist you in your journey.
- Hear what you plan to do before you raise capital and how you’ll track your progress.
- Learn more about how you handle challenges that will inevitably pop up along the way.
- Find out whether you are ‘coachable’; meaning your ability to listen and learn from trusted advisors and to take action.
How about a coffee?
Last year, Investible saw over 1,500 opportunities, sat down with 225 companies and invested in 13. We’ve got even bigger ambitions for the year ahead.
With that in mind, here is my call to action for founders – if you’re genuinely interested in seeking advice and are more than three months from raising a seed round, please reach out. I’m happy to have a conversation over a coffee (or a virtual coffee).
Give yourself the best chance of receiving investment by being more than a ‘dot.’
I’d love to know what else you’d like to me write about.
Please leave a comment or send me a message with any burning questions or topics that you’d like me to address.