An Investor Strategy for Startups is key for new ventures. It is required as a part of your fundraising.
Investor Strategy for Startups
Your Investor Strategy is an internal document that guides the co-founders (and later the officers) of a startup in:
- Determining which Financial Exits are acceptable to you and therefore must be acceptable to Investors and must be reflected in Term Sheets
- Understanding which types of funding are appropriate for your new revenue stream, startup, or etc. These types might include:
- Investment by friends and family. This group is referred to by some as friends, family and fools (FFF).
- Angel / seed stage investors
- Financial venture capital investors
- Strategic corporate venture capital investors
- Factoring receivables (obtaining a loan from a bank based on a purchase order from a customer)
- Bank loans
- Government subsidies and/or grants
- If (for example) your choice is traditional angel/venture capital, then this document helps you to determine which potential investors are most suitable for your particular startup, SME/SMB, new revenue stream, etc. during this particular fund raising. As one consideration, some traditional angel/venture capital investors will not invest in a startup which has previously received investment from investors that the traditional investor perceives as non-professional investors.
- The Business Plan and type of Financial Exit imply how much investment must be raised. A particular investor will typically make investments in particular size ranges for specific levels of corporate maturity
- Creating any unique aspects to your Sales Kit for use in this fund raising
- Deciding which information to provide to potential investors in meeting #1 and which to hold back for disclosure in a later meeting after the investor is qualified. This can be a difficult issue as some investors will not be pleased when a startup tries to defer answering a question.
Many startups neglect development of an Investor Strategy. This can really hurt them during fundraising.