Going down the venture capital route? Here are 3 things many top entrepreneurs advocate while choosing their venture funding.
Author: DBS BusinessClass, Administrator of DBS
Securing financing from a venture capital fund is seen as a validation of an entrepreneur's abilities. However, there are two sides to every coin. Choosing the right funding will help your business to prosper and expand. On the other hand, an absence of clarity with investors can cause many startup leaders to lose control of their organizations or worse, be compelled to sell their business.
In order to help you to avoid going into the latter scenario, there are 3 things that many top entrepreneurs advocate while choosing their venture funding:
- Common goals with the investors: It is vital to see how your potential investors view your business and what their plans are for your firm. When there are an alignment of goals between both firm and investors, you might be looking at the right investors. While valuation matters, the investor offering the highest value is not necessarily the best. In order to bring long-term success and development to your firm, you and your investors need to work toward a common goal together right from the start. "Pick investors who believe in you personally and who you feel you can be open with", said Danielle Morrill, Referly co-founder and former director of marketing for Twilio.
- Timing: If you choose to raise capital too early, you may face many disadvantages in negotiation. In order to attract more (and better) investors, you will need to build a strong foundation for your firm and have a strong team before attempting to get any investment. All good deals rely on upon how well the firm is running as well as the competence and capability of its founders. A classic example would beJustdial, an Indian company providing search services all over India, over phones, the web, Mobile?? and SMS. Justdial was only ready to raise its first round of funding of 500 million rupees (US$8.1 million) in 2006, some 10 years after its establishment. To date, they have managed to raise about 5.8 billion rupees (US$94.1 million) of risk capital at the moment. Unless your idea is exceptional, it is always best to wait until your business has built its base.
- Expert backing: If you are unsure about all the legal terms, term-sheets, contracts or just simply how to plan your investment, find a lawyer or an expert in investment to advise you. He/she can also help you to negotiate for better deals, examine the investors and raise institutional funding. In Singapore, there are many channels for startup leaders to find advisors such as DBS Business Class itself.