Startup founders raising venture capital often feel pressure to get money “as much and as quickly as possible,” but they should also ask who they are allowing onto their cap table and to own a piece of the company, according to Crunchbase News. Antonia Dean, a partner at Black Operator Ventures, wrote that founders should pay attention to more than the size of the check or the valuation attached to it and instead intentionally construct cap tables around investors who bring different forms of value, according to Crunchbase News.
Ownership, board influence, and the cap table as a long-term decision
Dean wrote that “venture capital isn’t a loan” and that investors receive ownership in the company in exchange for the money they put in, according to Crunchbase News. Dean wrote that as startups mature, some investors may ultimately gain board seats and significant influence over decisions ranging from fundraising and acquisitions to leadership changes, according to Crunchbase News.
Dean wrote that as an early-stage investor she advises entrepreneurs to recognize that they are not simply raising money but also deciding who will sit at the table they are building, according to Crunchbase News. Dean wrote that the goal should not be assembling a cap table filled with whoever was willing to invest and that the strongest cap tables are intentionally constructed around investors who bring different forms of value, according to Crunchbase News.
Investors who can “open doors you can’t”
Dean wrote that founders have heard investors should bring more than money, and she argued founders should ask of every potential investor what they can materially help the company accomplish over the next 18 to 24 months, according to Crunchbase News. Dean wrote that for a fintech founder, that help might include introductions to banks, regulators, payment companies, or potential enterprise customers, according to Crunchbase News.
Dean wrote that a healthcare investor might provide access to hospital systems, insurers, or executives who understand lengthy procurement cycles, according to Crunchbase News. Dean wrote that an investor in consumer products may understand distribution, retail partnerships, or customer acquisition, according to Crunchbase News. Dean wrote that founders have to seek out strategic investors with industry expertise, relationships, and resources that can help solve problems capital alone cannot, according to Crunchbase News.
Dean wrote that when something goes wrong, such as when growth stalls, a key hire leaves, or a partnership disappears, an investor who can introduce five potential customers on Monday is more useful than one whose primary contribution was wiring money six months earlier, according to Crunchbase News. Dean wrote that founders should conduct due diligence on investors in the same way investors diligence them, including asking what platform support typically entails, talking to portfolio founders, and finding out whether the investor was useful when the company struggled, according to Crunchbase News.
Investors who understand the company’s exact stage
Dean wrote that a “billion-dollar growth investor” may have an impressive résumé but does not necessarily understand how to help a company with six employees, an unfinished product, and nine months of runway, according to Crunchbase News. Dean wrote that startup problems change dramatically by stage, including that at pre-seed founders may still be validating the market and searching for product-market fit, at seed the challenge might become hiring, repeatability, and proving customers will consistently pay, and by Series A investors may expect evidence the company can scale what is already working, according to Crunchbase News.
Dean wrote that stage-specific investors are valuable because investors who repeatedly work with companies at the same point in their development have seen the movie before, including knowing what metrics the next round of investors will examine, which mistakes frequently derail companies, and what milestones founders should prioritize before returning to market, according to Crunchbase News. Dean wrote that such investors also have “current fundraising intelligence” and that “forward-looking business intelligence can complement that firsthand perspective,” according to Crunchbase News.
Dean wrote that Crunchbase combines data on past financings with predictions and insights designed to surface company momentum and likely future developments, according to Crunchbase News. Dean wrote that investors actively evaluating companies at a particular stage can add qualitative context on what the market is rewarding right now, how expectations are shifting, and which milestones founders should prioritize before their next raise, according to Crunchbase News.
“At least one investor you can tell the truth”
Dean wrote that the most overlooked investor may be someone the founder actually trusts and that startups inevitably encounter moments when things go wrong, including revenue missing projections, co-founders disagreeing, executives quitting, products failing, and fundraising taking longer than expected, according to Crunchbase News.
Widely-known context: In venture financing, cap tables record equity ownership and can shape control and governance through board seats and voting rights.
