Investors: how build the relationship & what to keep in mind

In order for a business to grow rapidly, it also needs supporters who provide the necessary funds and contribute to the development of the company with their own experience. Investors are an important resource in the development of a business. Here's what you need to know about the relationship with them:

 It is important to find the right investor for you - and not only in terms of the type of investment you access, which you learned about in one of the previous articles, but also about their expertise and your relationship with them. Next we will talk about what investors look at when selecting the businesses to invest in and how to build a relationship that is healthy and beneficial to the development of your business.  

What are the things investors consider when deciding whether or not to support a business?  

Here are the factors that Sergiu Neguț, Associate Dean of Entrepreneurial Growth at Maastricht School of Management Romania, considers to be important. Sergiu is a consultant specialized in entrepreneurial growth, agility and innovation and actively invests as a Business Angel in local businesses (frufru, 2performant or Softelligence. He is also co-founder of FintechOS). 

  • The founder's experience (fields he has worked in, his previous roles leading a team or business) 

  • Chemistry with the founder: “The person in question must be decent, a person whom I would like to see a second and a third time. In fact, any process of attracting an investor is a sales process. And just like in any sales process, the first thing you want from the person you are talking to is for them to want to see your face again. We will most probably have ups and downs, and we will most likely not see eye to eye on various business matters. In this case, after agreeing to disagree, we must still want to see each other the following day to discuss what else there is to discuss and to take steps forward in our business", says Sergiu. 

  • The potential of the company: a business I am interested in investing has to have clear targets and benefits, to address a consistent market. 

  • The field of business – more precisely, the anticipated opportunity addressed by the business. In other words, the ability to anticipate changes in behavior and lifestyle is very important when you want to attract supporters with business experience around you. 

  • Exit strategy 

Founder's relationship with the investor – important factors 

  • A good relationship with them, a compatibility of visions and working styles, respect and understanding 

  • Experience in the field/industry in which the respective startup operates (there are certain investors specialized in the medical field, for example) - thus, in addition to the actual investment, they will also contribute with their own network, market knowledge and knowledge about the development of businesses in general.  

  • Regular meetings 

Best practices in developing a sustainable relationship with investors 

Negotiating the details of the investment is often the easiest step in establishing the relationship with investors. Finding the right investor for you and creating a connection based on balance and trust that will bring you a true partner not only for the sunny days, but also for the cloudy ones (which will inevitably come), can be a bit more complicated . Here are some suggestions proposed  by Cătălin Grigorescu, Managing Partner bpv Grigorescu Ștefănică:  

Document yourself about the investors (Due diligence) 

The financial investment might be the main contribution you expect from the investor, but it should not be the only aspect that interests you. If you have several options, you shouldn't take money from anyone who is willing to invest. The success of your business will equally depend on the input of information and expertise that an investor can bring to you. At the same time, it matters to what extent the investor, through their own team or the people they can co-opt from his ecosystem, can facilitate your access to potential customers or partners, increase your visibility and promote and support the next rounds of investments. 

You can form an opinion about all of the above after a minimal due diligence analysis regarding the potential investors. Look at the age and size of the fund, as well as the typical size of the investments made in companies which are at a similar stage as yours. Try to understand if your business is in the sector of focus of the investor, analyze the profiles of the partners and managers and look at the investments they have already made. Talk to the founders of companies that your potential investors have already invested in, and try to gain some insight about the early-stage negotiation styles and the post-investment engagement. The most valuable information is that which refers to the attitude and involvement of the investors when the business does not go according to your expectations, when impediments or blockages occur. 

Combine the information you gather independently with whatever info you can get from any direct discussions with the investors. They will appreciate that you approach the future relationship maturely. 

Do not answer the investors' questions about the value of your business 

One of the first mistakes Romanian founders make is to answer investors' questions about the value of their own start-up (worded more or less like this: “How much do you need and what percentage of the company are you willing to offer?"). And a mistake even bigger than this one would be answering this question in the Q&A session after a pitch contest presentation. But you should be on the lookout for such questions because, according to some authors with years of hard-earned venture capital investment experience, they are an indication that an investor is either inexperienced or trying to take advantage of your lack of experience in negotiations or his background as a potential funder. 

The main reason you don't want to answer a question like this is that whatever your answer may be, it will be wrong. Evaluating early-stage companies is more of an art than a science and takes into account many qualitative factors whose weight in the investor's decision you have no way of determining. Investors, if they are convinced of the potential of the product and business, will not refuse to make you an offer just because you, as founder, are not in a position to make an evaluation of your company. Your job as a founder is, in the end, to develop the product, the team and the company, and also give investors ease of mind about that, while the valuation is the investors' specialty, and it’s their job to make you feel comfortable and confident that their proposal is appropriate to the stage your company has reached.  

If you answer the question without having the valuation key, you will advance an arbitrary value, which will be either be smaller than what the investor would have been willing to accept (and you are making a bad deal for yourself), or bigger than would be acceptable for the investor (and you risk losing the deal, although all investors will tell you that they don't want to lose a deal on valuation reasons alone). 

Finally, I recommend that you remain aware of how the anchoring and adjustment effect in a negotiation (i.e. in the context of a price negotiation, the cognitive bias that describes the negotiator's tendency to relate to the first value offered during the negotiation and then make adjustments until it becomes an acceptable value for them) can determine the dynamics of the negotiation, especially with an investor that is aggressive in their valuations. If you want to find out more about anchoring and many other negotiation techniques that will be useful not only in your relationship with investors, I recommend you read in the book  Never Split the Difference: Negotiating as if Your Life Depended on It by Chris Voss and Tahl Raz. It has become a required reading in the company I am running, and not just because it's a law firm. 

Negotiate reasonably 

I have met founders who are afraid to negotiate term-sheets so as not to scare away the investor. I have met investors who complain about the arrogance of the founders. The key to balancing these perceptions lies in the reasonableness of the parties' expectations and demands. 

The best thing a founder can do in the negotiations with an investor is to argue their claims and demands as objectively as possible. Any founder must admit that venture capital investment entails, first of all, that the investor takes a great risk, and that is why they need a certain level of investment protection, in terms that are already common in the industry. 

At the same time, no investor will miss an investment opportunity simply because the founders have reasonable comments and proposals to negotiate the terms offered by the investor. On the contrary, the feeling that the founders are negotiating from reasonable positions will strengthen the investors' belief that they are investing in the right team. 

Cătălin Grigorescu has been, for many years now, a Managing Partner and leader of the technology advisory and transaction division of Law Firm bpv Grigorescu Ștefanică (, which is one of the top law firms with a Technology, Media and Telecommunications division of Romania. Cătălin is also an investor inInnoship and company adviser. 

Newsletter-ul Startarium. Citește sinteza lunară direct pe e-mail