Know if your financial associate candidates are right for you and how to decide between them
Raising money is not an easy process, but finding the right financial partners to help you build your start-up is much harder. When their capital is solicited, investors ask hundreds of questions to the founders, not only when pitching and until the round is complete, but even after bringing in their funds. Investors are meticulous when it comes to choosing where to house their investment capital. But what about the founders?
The startup phenomenon has led to the emergence of many new venture capitalists of all kinds. Therefore, entrepreneurs must be cautious about who they will allow to invest in their early-stage company.
It is necessary to put the investor on the grill because if one is wrong and once the “demon” is in place, any disagreement is potentially fatal! A business angel desiring “revenge” has less to lose than the founder.
Realizing afterwards that the investor is not on the same wavelength with the entrepreneur can be terribly damaging. A business angel is intrinsically an opportunist with a troubled personality in the sense that the angel can turn himself/herself without scruples and with amazing ease into a demon.
Do not waste your time trying to discover at them the elements of a potential friendship. Your co-founders can become your friends, not your investors. Better not to try to make them friends. They are not. They are businessmen. They are there to do business not friends.
The tenderness and angelism of the financier are sometimes short-lived. If he/she is smiling, cordial, friendly, that does not necessarily mean that he/she is your friend. Above all, he/she expects a return on investment from you, not your friendship.
I have developed a tool called The Startup Investors’ Suitability Estimator® to help you choose the most relevant investors, that is to say, the financiers most likely to contribute to the financing and development of the start-up.
This innovative approach combines scoring techniques with those of Behavioral Interviewing to model the analysis of the “start-up” legitimacy of potential partners-investors.
The underlying idea of this model is to systematically highlight the entrepreneurial talents of investors and evaluate instantly, through a pre-formatted behavioral assessment, their investor personality.
New companies founders often lack rigor and even method in choosing their financial associates. The selection of investors is usually done at a rough guess. This is an error that can have serious consequences for the survival of the start-up in the medium and long term.
I have therefore devised an interesting way of separating candidate investors, worthy of interest because it allows a selection that is both clear and logical. This model is all the better when you take a lot of factors (skills, abilities, talents) into consideration.
I first identified the elements that should be taken into account and then formalized the decision-making process. The tool uses a calculator, simple enough to be pragmatic, to quantify the key elements involved in the decision-making process of the founder.
The idea behind this calculator is to establish a weighting (on a scale of 0 to 10) for each of the key criteria chosen by the founder in search of financial associates, then assign a value to the contribution of each of the candidates investors (also on a scale of 0 to 10).
Then, we take the weighting and multiply it by the score of the candidate to obtain the weighted score. From there we get the overall score and ranking of each candidate.
The SISE matrix (available in English or in French version) includes 4 tables of calculation whose parameters are modifiable:
– Detailed table (figured example)
– Summary table (figured example)
– Blank detailed table (set for unlimited training)
– Blank summary table (set for unlimited training)