Conventional wisdom says don't be picky - take whatever funding you can get to keep the lights on, right? Wrong. A recent study by the National Bureau of Economic Research (NBER) proves what savvy founders have long suspected: the *right* investors are a MASSIVE strategic advantage. And not just for their rolodex and sage advice.
Author(s):
Param Nayar
Published:
Aug 25, 2024
Reading Time:
2 mins
Brace yourself for this head-turner: the mere presence of a top-tier investor increases candidate interest in your startup's job postings by a whopping 30%. That's right, just having their name attached to yours makes top talent sit up and take notice. No active intros needed. Seem too easy to be true? The NBER study proved it in a randomized field experiment on AngelList.
Even more compelling: this "passive value-add" effect is strongest for the startups that need it most. Earlier stage startups saw an eye-popping 50% increase in application clicks when advertising a top investor. Because when you're an unknown quantity, riding the coattails of a trusted name goes a long way. Later stage startups saw a more modest, but still impressive, 17% bump.
So what's an ambitious founder to do?
Don't just go for the biggest check or the splashiest brand name. Look for an investor who will be a true partner. One with a track record of portfolio success, a relevant network they're willing to tap, and a vested interest in propelling you to the stratosphere.
And once the ink is dry, don't let them be a passive line item on your cap table. Put 'em to work! Here are some ways to wring every drop of value from the relationship:
Collaborate on a joint webinar series showcasing how your product integrates with their portfolio companies' offerings. Use it as a lead gen tool.
Have them host an intimate dinner connecting you with 5 dream clients. Leverage the "social proof" of their endorsement to get a foot in the door.
Co-author a data-driven white paper on a problem your startup solves. Tap into their expertise and audience to establish yourself as a thought leader.
Offer to be a "beta tester" for their new portfolio companies. Get early access to cutting-edge tools while sharing your own domain knowledge.
Make them your "secret weapon" during a critical sales negotiation. Having them join the meeting shows you have heavyweight support in your corner.
Feature them in a "fireside chat" at your annual user conference. Bill it as a peek behind the curtain of a legendary investor's mind.
The bottom line?
In the fundraising dating game, be picky. The right investors will supercharge your success. The wrong ones will relegate your missed potential to the annals of startup history.
Choose wisely. 🔮
