When do I … ?
by Lou Wagman
I am often asked by clients who are early-stage technology entrepreneurs “when do I start contacting potential investors and strategic partners”. My answer is that it is never too early. Even if a company is not ready for angel or venture capital financing, it’s never too early to start establishing relationships with potential funders. If you have selected funds or angels who are interested in the technology sector you are playing in, who invest in the geographical area you are located in, and who have an appetite for earlier stage companies, they may want to learn what you are doing and start tracking your progress. Remember that venture funds and angels are always interested in learning where technology is moving so that they can be at the head of the pack rather than the rear. It takes little effort on their part and yours to stay in touch – perhaps as little as a conversation every three months. And when you start to approach their investment threshold, they already know a lot about you, especially how well you do in meeting your business goals and how credible you are.
The same holds for strategic partners. But here one needs to be very selective so that you do not waste their time and yours. Identifying your appropriate potential strategic partners requires careful research. It’s not only the obvious fact that your product or service may be important to their business. It’s also how they do business. Do they go outside for new technology and products? Are they an active acquirer? If so do they have a good reputation for working with outside companies? Are they a leader or a laggard in their field? But don’t forget that sometimes it’s the laggards who are most open to new products and services that will get them out front of their competitors. Once you have done this screening, you need to determine where to make contact within the organization, especially if it’s a large company. You need to identify the person who will become your champion.
So why have I come down so strongly on it being never too soon? The reason is that more times than not, by the time the entrepreneur starts his quest for funds it’s too late. Entrepreneurs typically become mobilized about six to twelve months before they run out of cash believing it’s ample time to get additional financing and establish strategic relationships. Unfortunately, the process often takes longer than a year and being desperate is not the time to be seeking and negotiating financing. This plays to the advantage of the funder, not the entrepreneur. So err on the side of starting too soon, not too late.
If you’d like to comment, please visit the “When Do I? ” Discussion as part of our Res Partners Group on Linkedin. If you are not a Res Partners Group member on Linkedin, please request a membership.
