Making the Right Investment Deal

An angel or VC deal can give your startup needed financial resources, but bringing on an investor also has other intangible benefits, so it is important to not only make a deal, but make the right deal for your company.

Perhaps the most important aspect to securing the right deal is getting the right valuation of your company and raising what you need (and only what you need). While it may be tempting to take a larger amount of financing early on, it also dilutes the founders’ shares (which will continue to be diluted in further rounds) so that when the shareholders get to the exit point (such as an acquisition, or potentially an IPO) they don’t have as much of the pie as they could have. However, it is also important to make sure you are not asking for too little money — it may tell investors that you are asking for too little money since you don’t know what you need and therefore haven’t done your homework, or it may turn off investors who think that a smaller sum isn’t worth the investment of their time.

That leads to the second important aspect of finding the right deal. Investors can help your company grow through not only the money they provide, but also through their expertise and contacts. Most angels and VC funds have a portfolio that revolves around the professional experience or interests of the angel or fund partners. A biotech startups probably couldn’t get as much help from an angel who was a former Google executive as they could from an angel with 30 years experience in the biotech industry. So when searching for investors, do not just think about raising money, but also consider the non-financial assistance the investor could provide your company as well.

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