TBC: The Right Type of Investor

TBC132_The Right Type of Investor

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[00:00:04] Jason Yeh: Hey there. Welcome to another episode of the Back Channel. In today's episode, I wanna talk about the importance of targeting the right type of investor. And when I say the right type of investor, at least for this episode, I don't wanna talk about what I think a lot of people jump to, which is investors that understand your industry or your story, or you know, the type of businesses that you're going after.

[00:00:26] That's not so much where I think. This episode is talking about, a lot of times when I hear people say like, oh, and you need to find the right investor that understands this type of industry that you're focused on, so that they get the reason that this problem exists. I often say, well, no, I think your, your baseline is wrong.

[00:00:44] I, I think you need to be great at telling your story to everyone so they get excited about it. I think your, you know, your, your challenge should be exciting, the lowest common denominator of all investors. And that if you stumble upon somebody who knows the [00:01:00] garbage industry, they will understand why that technology is more important to you.

[00:01:04] Now, that is one style of content or one episode that I would do, but this is much more when you're dealing with a type of company that requires almost a different asset class of investor, that is where I wanna make sure we are focused and spending our our time. Talking to the right type of investor. So this, this episode might not be for everyone, but the first question you need to ask yourself is, am I truly a technology driven, high growth, high speed, high margin software style venture bet?

[00:01:39] And that would be, you know, 90% of what venture capital investors are looking at. Uh, and if the answer is no, then let's make sure we understand what asset class of investor might actually be interested in looking at your deal. I think about this because I've recently talked to more than one founder who's working on interesting [00:02:00] things, actually more related to real estate.

[00:02:02] Where there's, there is, I. Um, a complimentary play or, um, something that has to do with real estate, the actual physical asset of real estate, where my answer to him wasn't like, oh, like, I think your story makes sense, or, I know why you're saying it, but the reason you're getting turned down by so many people is you're talking to.

[00:02:19] Pure play software, venture capital investors, where getting them to think about the big story here is going to be much more of a challenge. Have you thought about talking to real estate investors who will understand the value that you are bringing to the underlying asset that they might have tons of experience investing in?

[00:02:37] And that might be more of the interesting play and the type of investor that will understand who you're talking to, why you have an interesting business, and why partnering or even receiving investment from them would make a lot of sense.

[00:02:51] There are a ton of easy to make mistakes when growing a startup. I feel like I've either made them all myself or seen them all as an advisor and investor. [00:03:00] One super common one is waiting too long to bring in expert help around managing company finances. I get why that happens though. You're not a tiny company anymore, but you feel like you're not big enough to have an in-house finance team and don't wanna waste money.

[00:03:14] My advice to you is to avoid the mistake of just winging it. This is not a time to fake it till you make it. At least talk to someone early so that you can hear about how the additional help could actually save you money and improve your operations. If you're looking for recommendations on who to talk to, check out Propeller Industries.

[00:03:32] They've worked with hundreds of venture to growth stage startups, so have a ton of deep knowledge to help you avoid major bumps and set your company up for success. Whether it's talking to investors or planning for future growth. Set up a free call by going to funded pod.com/propeller. That's P-R-O-P-E-L-L-E-R.

[00:03:53] And tell them we sent you, they're giving funded listeners a one-time $2,500 new client credit if you work with them for [00:04:00] three months.

[00:04:01] for a lot of you, if you feel like you are straddling two industries, maybe you're in biotech, straddling tech and biotech, maybe if you're straddling real estate and tech, consider thinking around.

[00:04:17] who are the investors who only invest in that underlying asset, and would talking to them give you more feedback or smarter approaches at how to re raise capital? Who to raise capital from so that you're not stuck banging your head against the wall, only talking to pure pay play venture capital investors.

[00:04:35] One other flavor of this that I wanna make sure I mention is that so many people when they think I am running a business, I'm running a good business and I need a little capital to get to the next stage. The only option they think of is venture capital because it's kind of the only, maybe it's the only type of investor that's in their circle, or it's the only type of investor that hits the media that they consume, but realize that there are a lot of great businesses that [00:05:00] don't grow to venture scale that, um.

[00:05:03] Shouldn't be thought of as a venture play opportunity, but doesn't mean they're not a good at, um, a good potentially very profitable company that needs money, that that doesn't mean that you're a bad business. It just might mean that you need to look for capital from different styles of investors.

[00:05:17] It could mean that you need to find. Angel investors who are willing to take smaller bets. It could mean that you might need to see how debt is an option for you at this, at this stage of the game.

[00:05:29] So this is a one way of thinking about the types of investors that you should be going after that I think will save a lot of people, a lot of heartache if you think more deeply about it and make sure that you're not trying to jam a round peg into a square hole, square peg into a round hole.

[00:05:48] Is that the right analogy? Okay. I hope you got what I was saying. I hope this episode of the back channel is helpful and I'll see you on another one.

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