When to talk to investors: Early and often

I’ve probably posted about this before, but something I read this morning made me think about it, and it’s an important concept so forgive me if you’ve heard it before.

Nic Brisbourne from DFJ Esprit across the pond in the UK has an interesting post on apply lean startup principles to fundraising. I think it could have gone deeper in drawing the parallels and creating an “investor development” framework, but the essence is there.

An important point that comes out in this, is that just as you should get out and talk to potential customers before you write too much code, you should also get out and speak to investors as early as possible.

Too many entrepreneurs make 1st contact with investors when they are raising money. This is a high stakes game and unless you are an exceptional founder with past success or you have solved cold fusion, you have a very high likelihood of getting rejected.

Uber VC-blogger Mark Suster explains why on his post on investing in lines not dots. If I invest in a startup, I am entering into a high stakes multi-year, complex relationship. One where the path to success is not clear. So, I will only do this if I have a very high degree of confidence that you know how to navigate the pitfalls and grow a great company. It’s hard for me to assess that if I have just met you.

So, the more touch points you have with investors the better. Get out there long before you need money. Talk to people about your ideas. Investors see lots of companies in lots of different sectors and should have very valuable feedback and networks to offer. Get them interested and engaged and before you know it these informal helpful discussions could turn into funding discussions.

Nothing builds confidence more than when you tell an investor what you’re going to do, then come back later having done what you said you would do.

So, get in front of investors early and often!