Startups should make more effort to cultivate relationships with investors earlier on, as investment decisions rely on the investor’s opinion of the entrepreneur, according to AHUB panellists.
Speaking at the inaugural AHUB at this year’s AfricaCom conference, an investor panel said their opinion of an individual entrepreneur will generally be a key factor in the decision to invest or not.
“The first factor is do I really think this entrepreneur can make me money or not. To me, the idea is secondary,” said Eric Edelstein, chairman of Entrepreneur Traction.
“In young spaces [like Africa], what attracts me is the entrepreneur,” agreed Manuel Koser, founding partner of Silvertree Capital.
Early stage startups should also ideally be able to show some traction, Koser added.
All the panellists said entrepreneurs should cultivate ongoing relationships with investors, regardless of whether they are currently fundraising.
In fact, the panellists felt most entrepreneurs leave it too late to begin the fundraising process, which aside from being less than impressive in that it indicates inability to strategically manage the startup, also leaves entrepreneurs in a position of weakness.
“Many startups take the money because they have to. Often they have left it too late to start fundraising, and because of that the post-investment management becomes very investor-led,” said Oliver Drews, chief executive officer (CEO) of Clifftop Colony.
“My advice is to think hard and ahead as to when you’ll need to start your fundraising process,” he said.