Beyond Capital: How To Utilize The Power Of Your Investors
Are you getting the most out of your investors?
Chances are, the answer is “no.” Founders who seek funding from potential VCs are fastidious about selecting their investors wisely. But once that funding is secured and partnerships are forged, even the smartest founders and CEOs frequently underutilize the power of their board to help the company grow.
Capital is necessary to grow a business, but you need every resource at your disposal if you really want to win. Here are five things that your board members can and should provide in addition to capital.
Connections
Venture capitalists are some of the most connected human beings on earth. VCs are the nexus point between entrepreneurs who need capital and limited partners who want investment opportunities. Because of this, their networks–and opportunities for strategic partnerships–are virtually unlimited.
“One of the biggest advantages of having investors is [being able to access] their actual networks,” wrote business contributor Alida Miranda-Wolff. “These individuals and institutions have deep-seated connections across the venture capital, technology, and countless other spaces.”
If you have VC funding, leverage those connections, and make them work for you. A good VC board member will offer to make these connections, as it’s his or her job to help you succeed.
Recruits
Don’t be afraid to ask your board members for recruiting suggestions. Investors are typically well seasoned in the industry and know how to choose good employees.
Our investors have been particularly good about helping us recruit great team members. University Growth Fund, for example, brought in student resources to help us with a large internal project that became a key component of our business development strategy. And Service Provider Network helped us find an employee in Colorado with a special skill set that we were unable to find in Utah.
Combine an investor’s connections with his or her understanding of your company goals, and you have a recruiting vehicle that can efficiently connect you with your ideal work force.
Customers
One of the chief jobs of an investor is to provide you with relationship capital–and, hopefully, those relationships will organically turn into new business partnerships. This happened in our company, Simplus, when we partnered with Epic Ventures and Mercato Partners. Mercato’s Senior Vice President of Sales consults with all of the investment companies on their sales strategy. We asked the VP to make an introduction to some of these companies, and he did so by asking, “How are you using Salesforce? Do you need an implementation partner to help you maximize the use of the platform?” This inroad created an opportunity for us to talk with sales departments about their Salesforce implementation, and we were able to acquire many customers in a non-intrusive way.
Advice
One of the most valuable commodities an investor can offer is advice. In my opinion, advice from a seasoned board member can be more valuable than the actual capital contribution. If you have chosen your board members wisely, at least some of them will have special expertise in your field and can provide insight when you are faced with a difficult problem or decision.
“If you know your investors’ backgrounds, you should have a clear idea of when it is appropriate to ask for their help or guidance,” wrote Forbes contributor Ryan Caldbeck. He added that most are happy to help when the request is within reason. Savvy investors realize smart decisions strengthen the success of the company as well as their investment, and they are happy to share their wisdom as much for the intangible satisfaction of sharing as the monetary gain.
In my personal experience, the ability to reach out to a mentor for guidance–or even just to talk through something–has been invaluable.
Due Diligence
Behind every successful venture capital firm is a solid underwriting team. This comes in handy particularly when you are considering acquiring another company. Our investors were very helpful, for example, when we acquired a company that focused on the billing side of Salesforce Quote-to-Cash rather than the CPQ side, which was our expertise. The successful acquisition has proved to be an excellent business decision–but we already knew it would be, because we and our investors had done our due diligence.
Should they stay, or should they go?
Occasionally, an investor does not provide value to the company outside of his or her capital contribution. If you have investors on your cap table that can provide capital but little or no additional benefit, then it’s time to find a way to buy them out–if you can.
If you’re not sure whether your investors are benefiting your company, analyze them. Every six months, I list all of my investors and write down the resources they have that can help our company grow. Each investor is different, and each one was initially chosen to fill a need in the company. But, as business goals and investors themselves change, you may find that interests are no longer aligned or an investor is no longer helpful. If that is the case, then it’s time to make some changes.
“Finding capital for your business isn’t as much about dollars and cents as it is about dollars and common sense,” wrote business expert Ivana Taylor. “Building and growing this business is a team effort, so realize that your team consists of the constituents who are all invested in your business.” Your investors can help you achieve your business goals by providing connections, recruits, customers, advice, and due diligence. Go ahead and empower your investment team to build a collaborative strategy for mutual success.
Twitter @RyanWestwood
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