He who has the gold rules. This is almost always true. The exception is when a deal is so hot that investors are competing for the company’s attention. As an investor, should you just shy away from such an opportunity? If so, you may miss the next big thing and a chance for truly world class returns. So how do you ensure that you get the best opportunities? How do you stand out from the rest? Here are some tips.
1. Be clear about your level of interest
Most investors give mixed messages to companies, taking a long time to get to a “no” or a “yes”. The majority of investors will be ambiguous about any deal that comes in front of them. You can differentiate yourself simply by being clear and decisive.
2. Define concrete next steps
Dragging your feet is the surest way to lose out on a deal. If you’re interested in the company, then define specific next steps at the end of the meeting. Examples are: “Let’s get you together with some my partners later this week,” or “I’ll send you a copy of our due diligence list by Wednesday and I’d like to hear back from you with an idea of which items you’ve already prepared.”
3. Use the other golden rule
Treat startup CEOs the way you’d like to be treated. Respect their time. Don’t make data requests of the company unless it’s something you need to move the investment process forward. Schedule in-person follow-up meetings. Don’t pass off the principals to junior associates or professional advisers (lawyers, accountants, etc). CEO’s want to know they are dealing with the decision-maker.
4. Be responsive and engaged
Respond to the CEO’s emails promptly and substantively. “Thanks for the update,” doesn’t cut it. Take the time to give a thoughtful response. Such as, “I read your update with interest and have a few thoughts I’d like to share with you. Call me.” Or, “I thought of a potential partner you might like an introduction to.”
5. Don’t be shy about your value-add
Pitch your firm or yourself to the company. Other than money, how can you help them? How much of your attention can they expect and why should they prefer to work with you versus another investor.
These are the signals that entrepreneurs in the hottest startups are trained to look for. If you’re not prepared to spend the time to do everything on this list, then you probably won’t get the very best opportunities for investment. If on the other hand you are, then you can beat much larger firms or individuals with much larger checkbooks and grab a stake in the most promising startups on the planet.
If you haven’t yet registered for StartFast Demo Day, August 16, 2012, then now is the time. Seats are limited. Register now.