If You Really Want to Change the World: A Guide to Creating, Building, and Sustaining Breakthrough Ventures by Henry Kressel & Norman Winarsky

Author:Henry Kressel & Norman Winarsky [Kressel, Henry]
Language: eng
Format: epub
ISBN: 9781625278302
Publisher: Harvard Business Review Press
Published: 2015-09-28T22:00:00+00:00

Once you have your value proposition and business plan, you’re ready to approach investors. The next chapter will show you how to choose them and how to go about gaining funding.

CHAPTER SIX

Choosing Investors and the Board of Directors

* * *

The greatest value investors and board members provide is their knowledge, experience, and support—not just their money. If you’re choosing investors for their money or deal terms alone, you’re at great risk.

* * *

ENTREPRENEURS SEEK VENTURE OR PRIVATE EQUITY capital investment in order to accelerate business growth. In fact, 91 percent of the companies listed on the NASDAQ were backed by one or more of nine hundred venture capital firms.1

But venture capital investment isn’t only about the money. The best firms provide resources that are far more valuable than their financial investment. Their investment serves as an immediate signal to the world, marking the venture as important and valuable—something to pay attention to. And they help recruit top talent for your team. By having seen hundreds of ventures in their chosen market domain, they are usually experts in the ecosystem—how it works, what has succeeded, and what has failed. They take a role on the board of the company and make crucial decisions about its continued leadership and investment strategy. They introduce the company to potential customers and partners. They help the company navigate the constant threats and opportunities that unfold during its life. In short, they provide the expert guidance, support, and mentoring that every venture needs.

The best teams understand the value of the experienced venture capitalist and seek investment not based on the largest offer or the least dilution, but on these other, less tangible—but more important—attributes.

While we focus in this chapter on attracting investments from professional firms that manage capital, it is important to mention the availability of capital for start-ups from individual angel investors who are prepared to risk money in early-stage companies. These individuals can be a valuable source of funds and advice in the early years of a venture, but there may be risks in the conditions set by such investors and care is therefore needed in seeking such sources.

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