Getting the most out of your investors
Finding the right investor for you in the early stages is incredibly important.
Following on from our “Choosing the right investor” article, we want to emphasise how important it is to choose the right investor for you by providing a tool for you to use and score your current investors, as well as potential future investors. As a caveat, this tool may not work for you if you are seeking a more passive investor. Ultimately, you are giving up a part of your company to investors, so it is only natural for you to want investors who can add the most value to your business.
Thus, we are providing you with an investor scorecard template
You have just as much right to assess your current/potential investors as they do. With this scorecard template, we believe that you, as founders, can score investors based on the number of introductions they provide you with throughout your fundraising rounds.
We want to practice what we preach, so we have given this scorecard to our founders to use to score us too! We have also implemented this system in our Limited Partnership Advisory Committee (LPAC).
Why are introductions important?
Introductions are important for many reasons. For one, they help to expand your network as a founder. Secondly, these introductions may lead to long-term relationships that could be critical to the success of your business. As you grow, you will need access to more key talent for your business, crucial advisors/mentors who are knowledgeable about your market, other strategic investors who can help grow your firm, and most importantly of all, CUSTOMERS.
We believe there are at least five types of introductions that an investor can make for you that would significantly add value to your business:
Introductions to talent
One of the hardest things that you will encounter as a founder is attracting and retaining talent. Good investors should be able to introduce you to a myriad of quality talent for your business. For example, you may be a non-technical founder and require introductions to potential technical co-founders and/or developers who can make your solution come to life. On the flip side, you may be skilled technically, but need a sales lead for your business to attract customers.
Kathryn Topp, CEO and Co-founder of Yabble
“At Yabble, we feel incredibly fortunate to have investors that are an extension to our business, they are there at the end of the phone anytime to bounce ideas, help work through solutions to challenges or introduce us to the right people at the right time. The most recent example being, we needed someone smart, proven and trusted to work with us to launch Yabble into the US market, and Rob Vickery at Hillfarrance was able to connect us to a vastly experienced, exceptionally well-connected person who we have now appointed as our new Country Manager, US. We’ve also had our investor network set up meetings for us with large multinational brands, to support our offshore expansion. All connections, that have made a significant positive impact on our business, and ones we wouldn’t have had without their support”
Introductions to customers
Like our “choosing the right investor” article, introductions to potential, qualified customers is one of the most impactful things an investor can do for your business. Customers = revenue, which will be the lifeblood of your business. Regardless of what industry you are in or what kinds of products/services you sell, without more customers, you cannot grow. Hence, the ability to introduce more quality customers to you is such a valuable quality of an investor.
Introductions to current investors
Let’s assume you are currently raising money for a seed round. You need to find investors. Finding potential investors, pitching to them and building a relationship with them is an important, but extremely time-consuming process. Having a good investor who can open those doors and introduce you to other investors and VC’s will save you time, money and allow you to spend more time on the actual business rather than focusing on fundraising. The introduction to other current investors also proves to be valuable in expanding your network, but also to take advantage of the skills and knowledge of another investor.
Introductions to subsequent investors
Of course, you will need to raise more than one round and require more investors to hop onto your cap table. Seasoned investors should be able to introduce you to VC’s for future rounds of fundraising. This ultimately saves you precious time (and money) when it comes to raising more money, as you do not have to go out and look for subsequent investors yourselves.
Introductions to advisors and mentors
Advisors and mentors offer advice and guidance to you that could be instrumental in your businesses long-term success. They have knowledge that you may not know yet and can offer complementary (or constructive) insights into your business. The nature of your business needs also change throughout the lifecycle of your business, so having the right advisor at a pivotal stage in your business could ultimately save you time and a lot of stress.
Greg Sheehan, Co-founder and CEO of Playbooks
“Nothing beats investors who have domain expertise and who can not only provide the necessary capital to fuel the company but the encouragement and backing to fuel the founder. At PlayBooks, we are super fortunate to have some of these people both on our Cap Table and Board. For example, one of my investors (with domain experience) has continually helped me to gain a perspective of focus around the problem being solved and the value proposition being presented”
Let’s explore the scorecard
When you first open up our scorecard template on excel, there will be three tabs:
- Scorecard Summary: Provides all the outputs for your given scorecard. This tab sums up and compares each of your current (or potential) investors and gives you a good great overview.
- Benchmark: This tab gives you instructions on how to score your investors and what these respective scores mean.
- Scorecard: This is what you, the founder(s), use on the template.
We wanted to keep this as simple and as minimal as possible. This will be your dashboard to see the total scores of each investor. This total score encompasses the individual scores that you give investors based on those numbers of introductions they give you.
Benchmark: The read-only section
This section provides insight to you on our views of how an investor should score in each quarter from pre-funding to post-funding operations.
Let’s break this down by explaining our reasoning behind some of the benchmark number of introductions:
In this stage, you are usually just a couple of founders and maybe one or two vital employees. Attracting early talent is important, but it is not the be-all-end-all. It is good, however, to have an investor introduce some quality talent to you early so that when you do raise money, you already have that pre-existing introduction to recruit important hires. What is crucial in this phase, however, is finding and connecting with investors who will fund your initial round. Introductions are incredibly important at this early stage and can set you up for the entire life-cycle of your business. This is where you gather as many minds, networks and resources as possible so having someone there that can introduce you is precious.
Finally, introductions to advisors and mentors are also incredibly beneficial during this stage since you are just getting off the ground. Having a few awesome people on your advisory board will make all the difference.
Q1 – Q3
Quarter 1 implies that you have received funding from investors and are working towards building your business. In this case, being introduced to current and subsequent investors is not important as you have just raised. What will be important is hiring awesome talent with your newly raised funds, growing your customers and finding some advisors or mentors who will support you.
Q4 – Q2 (Following year)
Here’s when an investor should look to start introducing you to subsequent investors for a follow-up fundraising round. Depending on your own circumstances, this could be later or earlier, however, the idea is still the same.
A trend you will see in this benchmark scorecard is the constant need for investors to always introduce quality customers each quarter. You always want to be introduced to quality customers. Period.
Additionally, it is always helpful for investors to introduce you to more and more advisors/mentors throughout your rounds to assist in the different stages of your startup. For example, you may need an advisor to help you with fundraising advice at one stage. However, at later stages, you may need a specific advisor to help advise on increasing customers or growth. You can learn more about advisors in our article here.
Score Break down
Once you have scored your investor, the scorecard should display a total that is highlighted in one of three colours. These correspond to how they score out of the benchmark total of 122 points.
Scorecard: The one that you use
Here’s where you, the founder(s), input all your scores for your current/potential investors. We have given you 10 Investor scorecards but you can always add more to this by copy and pasting more.
Scores will automatically tally up in the “Total” column to give you an overall score which will be displayed on the “Scorecard Summary” page.
From our perspective, seeking venture capital for your startup is NOT only about the money. It’s also about the additional value that investors can add to you through these different introductions. We hope you enjoy this template and use it, iterate it, and make it work for you and your startup!