The Keys to Finding Aligned Capital
It’s common for early stage founders to desire investors that share their vision for all aspects of the company. Many call this “aligned capital” and it’s not as easy to find as you may hope. Sometimes you may not have access to the right type of investors. Other times your vision for the business doesn’t match the risk profile of potential capital sources. Under all circumstances, the process of finding aligned capital requires a journey of self-discovery and a willingness to be vulnerable.
Coming together is a beginning. Keeping together is progress. Working together is success.
Below are three considerations for founders seeking aligned capital:
1. Be honest with yourself
There is a lot of idealism at the earliest stages of a company, which is natural given the endeavor of the entrepreneur. You are going out on your own, chasing your vision as you see fit.
However, in order to be successful you must balance idealism with pragmatism, especially when it comes to bringing on partners. An entrepreneur must consider all facets of partnership and management, and ask themselves which aspects are of utmost importance to them.
For some, it’s preserving the social mission of the company in the midst of raising capital with fiduciary concerns. For others, it’s protecting their vision of corporate culture. Whatever the issue, a founder must take inventory of how they think and feel about it in order to properly evaluate investor fit.
Now that you have examined all aspects of partnership, be clear with your prospective investors on the ones that matter most and be willing to listen to their perspective. Additionally, seek to understand their operating history to ensure actions line up with values. In my experience, the issues prioritized by founders during the early stages are not the ones that create tension with investors. The biggest issues are usually interpersonal.
Finding aligned capital is like finding a good friend. You want someone that you agree with on the big things and have grace for one another on the small things.
If your goal is to earn a modest living while providing affordable solutions to a certain community, then…
2 . Be honest with investors
There is a lot of posturing that happens while raising capital. Founders present a picture of the problem, their solution, and the market that is compelling. They go on to explain why they have built the perfect team to execute on the plan. Now, if what is presented to investors actually occurred then all organizations would be successful. However, the pitch to investors is rarely the reality the company experiences as they execute on their plans. It’s this reality, the hard one, that’s important to discuss with investors.
In addition to the compelling picture for investment, an entrepreneur should have a list of things that scare them and not just fears derived from market forces. It’s rare when you meet a founder that has all of the skills to grow a company from an idea into an attractive exit target.
It’s important to share where you feel insecure; where you need to grow; and most importantly, how you are going to tackle these concerns. Personally, nothing endears me more to a founder than honesty and humility.
If you aren’t honest with the investors prior to making them partners, you won’t know if you have truly aligned capital.
3 . Share the story as it evolves
If you were honest with yourself and honest with your investors at the outset, then you will have the foundation to share all aspects of your journey. This is where the real benefit of alignment comes in to play.
As the founder, you spend most of your time doing whatever must be done to keep things moving forward. Communicating how things are going, both good and bad, with your investors is essential for maintaining alignment. It’s difficult to remain aligned when secrecy is present. That being said, discretion is different from secrecy and there is a line between everyday business challenges and ones you need to share with your investors.
Like any relationship over time, challenges will occur that have the potential cause division amongst partners. How challenges are handled can either build alignment or destroy it.
Have your thoughts on the need for aligned capital changed having read this article? Let me know! I hope this process has helped you to identify what’s truly important, and empowered you to openly discuss the challenges that lie ahead.
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