Investor Insights: Top Tips for Startups
Strategies, Advice, and Experience from the Startup World that Impact Success and Longevity
While I believe it is brave to start your own business, especially when statistics are stacked against startups, there are some common mistakes that can be easily avoided to ensure financial success and organizational longevity.
As an advisor to startups, I am passionate about helping people grow their businesses and have been fortunate enough to experience and learn from various clients as well as my own businesses. I have compiled my top recommendations for both those entering the startup world and for those who have been around awhile and may need an extra motivational push.
Your Staff Is More Important Than Your Product — Always
The core component to any business is its people. It does not matter what product or experience you are selling nor how big your company is, your staff and their wellbeing should always be a top priority.
This does not mean hire as many experienced people as you can possibly afford.
Having too many employees leads to substantial outgoings, so be selective and steady with who you hire. Conservative hiring can mean hiring for potential — experienced employees come with a hefty price tag, therefore consider an employee with potential who can grow with the company. Another option is outsourcing jobs to trusted third parties, such as taxes or financial planning.
Insider tip: Consider what it looks like to an investor if you have to disassemble your team because you hired too quickly and couldn’t afford the upkeep. Reputation management should not be forgotten.
Limiting Investors and Advisors
One of the biggest mistakes made by small businesses is bringing on too many investors. While debt-free financing may seem like an attractive offer — it is simply too good to be true, for three key reasons.
- When companies turn profit, you will be sacrificing a percentage of that — for example if you sell 15% of your equity, you will make 85 cents to the dollar, rather than the full 100.
- If that same company starts earning 40k per week, regret sets in — selling 15% of your company equates to over 300k per year in revenue that you will never see.
- When you sell off percentages of your company, there are more people at the table — therefore, your voice starts getting lost and it is easy to feel like you’re losing control of your own company.
Insider tip: It makes the job of the investor equally as hard when there are many voices at the table — but investors are not all bad. I advise you to work with like-minded individuals, who can offer help and support as well as monetary value.
I cannot stress this enough — have a plan and follow it. The plan is for you, while the metrics you hit are for the investors. Investors are looking for fully functioning businesses with teams, met KPI’s, numbers, and traction — not just plans and ideas. Ensure your business is operating according to the plan before you seek investment.
Insider tip: Start with a lean business plan including bullet points, milestones, metrics, and projections. Review and update often and ensure you follow it. You do not need to have a lengthy dense plan in order to pitch to investors — just one that works for you and the business.
Create a Trusting Working Relationship with Investors
Creating a relationship with your investors is crucial — mostly because if the investor feels like something is off, they won’t work with you, it is as simple as that. A few critical things investors look for when starting out include:
- Trust in your character, judgement, and leadership — show the person behind the business.
- Share, share, share — if and investor feels like you are withholding significant information, they will hesitate to move forward.
- Be flexible and willing to learn — investors come with knowledge and enjoy advising, so don’t be defensive when help is offered.
Insider tip: Your investors and you are on the same team. Generally, investors have valuable information and experience, so create a relationship that builds on uplifting success.
Be the Expert
If someone is to invest in you and your company, they expect you to be the expert — not only the industry expert but also on your business, marketing, financing, and team structure. When preparing to pitch to investors, make sure you bring a detailed analysis of your niche market to prove that you know what you are doing.
Insider tip: It is essential that your team knows how to operate a business, meet deadlines, and follow through on objectives.
This is not a finalized list of everything to take into consideration when starting out — for example, finances and marketing should be top of the list as well. It is common knowledge that roughly 90% of new startups fail, while over 50% do not make it to year five and only 40% are able to successfully maintain a profit — however with enough grit, ambition, and potentially the right investors, the startup journey is fulfilling and never boring.