Congratulations on signing a term sheet, closing a SAFE, and securing funding! You are now a funded startup. You chose your investors carefully, and you are excited about all the help they will provide. However, if you don’t clarify your expectations with the investors, this may not be the case. Let’s discuss the most common value-added services you can expect from a good early-stage investor.
- “Do No Harm” — This might be a contentious statement, but expecting an investor to do no harm is a significant and often rare quality. Some investors meddle excessively in the startup’s business, waste the founders’ time with endless calls and reports, and generally attempt to steer the ship. A good investor trusts the founder to steer the ship. A good investor offers their help and advice when asked, with no ego or expectations. Borrowing from Douglas Adams, I would say that a good investor’s baseline should be mostly harmless.
- Sourcing/Interviewing — Now that we’ve addressed the first point, another significant value that your investors can provide is access to qualified individuals for hiring and their involvement in interviewing candidates for key roles. Providing the investors with a comprehensive job description is always beneficial. Also, ensuring they are aware of the urgency and time frame can be very helpful. On average, I engage in at least one sourcing effort or conduct an interview for my portfolio each week.
- Advisory / Mentorship — Being a founder is an incredibly tough job, and it can often be a very solitary experience. A good investor could lend an ear and share experiences they’ve had in similar situations. That’s why it’s fantastic to find early-stage investors who have undergone what you are experiencing and possess expertise in your field. However, remember that advice from an investor is just another data point. It should be evaluated alongside a mixture of data and customer feedback if necessary. A good investor remains calm when things go awry. They act as your biggest cheerleader, but they are also not afraid to tell you the hard truth when needed. On average, I spend around five hours a week providing advisory services to my portfolio.
- Network / Connections — A good investor is well-connected and can introduce you to valuable partners, customers, other investors, and fellow founders in your field. Certain investors, like Y Combinator (YC), excel at networking and fostering a sense of community. Others might be more specialized, such as a CFO-angel group that invests in founders building financial services and can serve as reference customers. Another aspect of this value is the amplification of your message. I tend to like and share a lot of content from my portfolio, and my followers often fit the demographic that these companies are targeting.
- Reputation — This is a passive value, but a crucial one. If you’re building a commerce startup, having Jeff Bezos as an investor would be fantastic. Even if he doesn’t have any time to dedicate to you, his vote of confidence can be a powerful asset when speaking with future investors and even customers. Some of the companies in my portfolio include me in their public relations materials. While I’m certainly no Jeff Bezos, I do have a bit of fame, or perhaps notoriety, in my particularly geeky sphere. 🙂
There are many other benefits you can gain from your investor. Some have market analysis tools you can utilize, others assist with public relations, and some even offer business development and sales support. However, from my experience, the majority of the value comes from the points I’ve outlined above. It’s incredibly important to find the right investor who can act as a partner, providing the assistance you need. But it’s crucial to understand that the responsibility to ask for this help should be on you. Don’t expect the investor to proactively offer help, as this can often lead to undue interference in your business, thus breaking the first rule in this article.
If you need help, just ask; a good investor will be ready to assist.