Raising money through investors is like building a long-term relationship, not so different from dating, five Baton Rouge company leaders said at a BREW panel on Thursday.
Chris Cummings, founder and CEO of Pass It Down, suggests the popular pitch-based television series Shark Tank has given entrepreneur pitchers an unrealistic expectation of what the investing process is like.
“The show implies that you show up and in five minutes, someone is cutting you a check,” Cummings says. “But it’s really more like dating. You’re building a relationship.”
Brian J. LaFleur, developer of LaFleur Industries, adds that an investment has to be a good fit for both parties—the investor and the entrepreneur. He encourages both sides to complete due diligence on one another, with entrepreneurs looking into the would-be investor’s portfolio. Relationships with early investments could hint at how working with that investor will play out.
“Raising money is a long-term relationship,” LaFleur says, adding companies should update investors every two weeks so there are no surprises at the quarterly meetings, which he warns can promote a toxic culture.
Along with completing due diligence on the potential investor, an entrepreneur should be thoroughly informed on their own company’s financials and infrastructure. A company leader should know exactly when they will need additional funding, says Chris Jordan, chairman and founder of Omnideck, and they should be flexible enough to bring on people to help as needed.
“Don’t be desperate,” says Tee Brown, president of GFMS, adding desperation can open an entrepreneur to accepting a bad deal. “There’s not a worse position you can be in as a company than asking for money when it’s obvious you don’t have any.”