The world of investors is somewhat mysterious. They often tend to operate in secret. Investors think differently. They invest in your Startups only if you are making it big or popular.
They cannot be approached by emails or calls. As a founder or an entrepreneur, you must wonder why an investor funds in your startup rather than investing in a stock market?
The ultimate goal of establishing a startup company is to make profits. To achieve this, angel investors, as well as venture capitalists, should come to their rescue. The first step as a founder, you must be able to read an investor’s mind so that you can negotiate with them easily.
Here, we summarize about how investors think.
Firstly, investors are of two types – Venture capitalists and Angel Investors. VC’s invest other people’s money and angels invest their own money. Angels always tend to fund riskier projects than VC’s.
Most investors are looking for hits. Since most startups fail, in order not to waste their time, they invest only in those startups who are recommended by other VC’s. They would go through the people they already know.
Now, once the VC makes his mind to invest in a startup, he will get a board seat with almost every investment. This board seat comes with all the responsibilities to attend the board meetings.
Whether you are a 10% partner or a 50% partner, you should be sitting in the meetings. So VC’s tend to invest more money as per the deal so they can take the larger amount of investment as returns.
So, keeping all these into account one should discuss terms with the investors. If you want to negotiate with a VC, remember that their ultimate goal is to maximize their returns. All you need to do is to make them feel that they should invest in you right now or else the opportunity is gone forever.