When we interviewed William Bao Bean (General Partner at SOSV and Managing Director of Orbit Startups), we asked what makes a good match between an investor and a startup.
“For us the number one driver is ‘Can we be helpful?’”
Orbit’s approach to selecting investments isn’t about whether they can make money from that startup very quickly; but instead whether they, as investors, are well positioned to support that company long-term. For startups, this should be a green flag – because an investor can be much more valuable than the cash they inject.
An investor can be your business partner
Have you ever seen the UK entrepreneur reality show, Dragons’ Den? Entrepreneurs and startup founders walk into a room and pitch their business idea to a panel of experienced investors, and then the investors (the Dragons) compete for equity if they like the pitch.
Several of the show’s investor alumni (including Steven Bartlett and James Caan) have appeared on the keynote stage at LEAP. So we had to get a little bit obsessed with Dragons’ Den. And the more you watch that show and then find out what happens afterwards, the more obvious it becomes that the entrepreneurs who go on to build the most successful businesses didn’t just secure funding – they secured a business partner.
When the investor’s experience and values are neatly aligned with the startup, they can offer mentorship and growth opportunities that are just as important – or in some cases, much more important – than the cash.
As Bao Bean put it,
“No one works with Orbit for our money, they work with us for our help. We write small cheques and we take a good amount of equity. So what really matters is the help, because we do our best in every company we work with and then we follow on – but we take equity for our programs as well and it’s expensive. We have a very high Net Promoter Score from our startups because they feel that they get value.”
Providing value motivates the investor
For Orbit, “the majority of our investments come from referral.” But that places continuous pressure on the investors to ensure they’re providing a service that startups want to recommend to others: “we need to constantly drive a huge amount of value for the startups we invest in.”
So for startups, working with an investor that relies on referrals to find new businesses can add another layer of assurance that the investor will work hard for you. Because they’re incentivised to help you reach your goals and grow: “A program lasts forever and we continue working with the company throughout its lifetime,” Bao Bean added. “We need to be able to be at service.”
Warren Buffett famously said, “never invest in a business you can’t understand.” And startups should flip that when they’re about to enter into a partnership with an investor – never work with an investor who doesn’t understand your business.
Experience, expertise, and a network of resources
The message here is simple: if you’re seeking early-stage investment, the right investor isn’t always the one with the deepest pockets. Look for a VC that gets your business, believes in it, and can add value in the form of their experience, expertise, and broader network of resources.
Want to connect with your ideal investors? Register your interest for LEAP 2024.