“You can’t ‘divorce’ an investor once they’ve bought into your company,” says Weaver. “At that point, financially, legally, and emotionally, they are part of your business. Yes, down the road, a restructuring or a buyout might allow you to change backers, but you can’t count on that. It’s far better to thoroughly vet business investors upfront and choose someone you feel you can go the distance with.”
Questions to think about:
- Has the investor worked with other businesses of your size and scale?
- Are they familiar with the technology, regulatory environment, or competitive pressures of your business?
- Where are they geographically? Have you looked at investors from other regions of the United States? Other countries?
- Are you willing to give up some control?
- If so, what are potential deal breakers for you, for example, adding a product that goes against your personal values?
Your Truist relationship manager can help you determine what matters most, particularly if you’re not able to talk to your team about investment options.
> Read about how Truist helped find and vet investors for hormone replacement therapy provider Biote, which went public in 2023.
Finding investors takes time.
Seeking and screening investors for your business can be as intensive as recruiting for a key role. VC firms spend 20 hours or more1 on due diligence for each potential investment, so you should expect to do the same. But be careful to balance this with keeping your business going strong in other areas, including customer experience, employee engagement, and technological innovation.
“It can be tempting for founders to shift their focus from running their business to seeking money and telling their story,” says Jason Cagle, head of industry specialization and advisory for Truist Commercial. “While it’s important to be engaged in the process, this isn’t the time to ease up on operations and management. That’s why it’s so important to seek guidance.”
And don’t forget to make room in your calendar and budget for things like traveling to meetings, creating strong pitch materials, and scheduling assessments and legal work.
Questions to think about:
- How will the time investment you’ll need to devote to vetting potential investors affect your daily operations?
- Are there tasks you can delegate to others on your team to free you up for the vetting process?
Keep in mind that you may lose some revenue if your search requires slowing down other parts of your business. Your Truist relationship manager can provide advisory support as well as financial solutions to balance these interim moves.
Start looking for investors before you need them.
Venture capitalists and angel investors can often wait years to make a move. That’s a painful truth when you’re looking to grow right now.
What’s a founder to do? Make yourself aware of investors in your area and industry now—and be on the lookout for potential investors all the time.
Network with them in groups. Go to lunch one-on-one. Talk to other founders they’ve backed. See what they’re up to on LinkedIn. Meet with them at industry conferences. Get to know what they value and how much risk they’re willing to take on. Look into how they deal with vendors, peers, and employees by talking to other firms they’ve invested in and reading online reviews, social media, and media coverage.
Questions to think about:
- What does your long-term growth plan look like?
- Who else is helping you in your search?
Let your Truist relationship manager know about your goals so they can help you build connections. They can also serve as a well-informed sounding board early on when you’re not ready to share your long-term plans with your team, your friends, your family, or others who might not be objective advisors.
“Clients often engage our Truist Securities teams with questions about investor due diligence,” says Cagle. “And I’m glad they do. Even if they’re not sure that seeking outside investors is something they’ll ultimately choose, we can make it part of our ongoing conversation across the business lifecycle so they can make the best choice possible for their enterprise.”
