What is smart money?

Founder, we get you. Everyone is telling you to find smart money. But what is smart money, really? 👇

Funding a pre-seed investment round is about much more than getting money to underpin the next stage of growth. The right investors provide smart money – meaning they can do much more for your company’s success than underwrite the monthly cash burn. They can:

• Bring expertise needed to make your business successful

• Be your greatest cheerleaders: Share passion about your business proposition with others

• Open strategic doors for your company

• Participate in/lead future funding rounds

• Be free labour!

It is important to choose your investors carefully – they will likely be with you for many years to come and getting rid of investors you fall out with can be painful, costly and difficult. So time to do your homework!

Think about the following criteria when developing a profile of the right investor for your startup:

✔️ Do their interests align with ours? E.g., have they invested in businesses in similar sectors to ours? Have they stated a clear interest in a topic/sector such as cleantech, medtech or fintech?

✔️ Do their publicly expressed opinions reflect ours?

✔️ What can they bring? E.g. do they have deep experience/expertise in the market/sector we will be operating in? Do they have networks we would like to access? Do they have functional expertise we need? Can they enhance our credibility?

✔️ Do they have the funds and experience? E.g. is the investor a certified high net worth individual (HNWI)? How many years have they been investing in startups? Have they been a lead investor?

✔️ Can we work together effectively? E.g. how closely do they want to be involved in daily operations? Do they have time to support you? How easy are they to get along with? Are they geographically close?

The ideal version of your future investor can help you focus as you compile a list of people to contact, but reality will not always match up, so here are a few tips to ensure your smart money hunt is efficient and effective:

✔️ Prioritise: Which of the criteria above is most important in helping drive your startup forward? If you need doors opening to possible partners or specific skills to be credible, look for these first

✔️ Be patient: Don’t jump at the first offer of funding. Get to know the potential investor and keep having conversations with others as you do

✔️ Be realistic: You might want Bill Gates or Richard Branson to invest, but this is real life… Shoot high in terms of quality of investor, but be realistic in terms of who you can access/attract

✔️ Embrace diversity: Ideally you want investors who have some diversity in their investment portfolios, so they bring different experiences, ideas and strengths, to improve your proposition

If you still have questions about finding smart money, feel free to book a quick FREE chat with the Activate Ventures Team.