Bay Area Business Lawyers | Primum Law

You Got the Investment Commitment – What’s Next?

Remember that episode from Silicon Valley where an investor offered $200,000 to the company, and then, to everyone’s surprise, demanded the business plan, financial model, and a cap table to be provided within 48 hours? It may seem like a fictional scenario, but in the startup world, it’s more common than you’d think.

One of the key reasons why the founder was surprised by this request is a common misconception that the product alone is what matters most to investors. While a groundbreaking product is crucial, it is not the only piece of the puzzle. Even the most innovative product cannot succeed if the team behind it lacks a solid plan and the skills to bring it to market. Investors understand this all too well.

So, how can you bolster your credibility in the eyes of investors? Let us dive into it:

1. Assemble a Strong Team and Define Roles:

   Ensure your team is well-organized and understands their roles. Have a clear company structure in place, distribute equity among founders and key team members, and appoint officers and directors. Everyone should know their responsibilities. Compensation with equity should be transparent and based on each person’s importance to the company’s success.

2. Secure Your Intellectual Property:

  Protect your technology by having IP assignment agreements in place with founders, contractors, and employees. When applicable, secure patents, copyrights, or trademarks to safeguard your product. Investors find this important to reduce risks.

3. Sound Financial Management:

   Implement a robust financial management strategy, including budgeting, financial projections, and a plan for using investor capital responsibly.

4. Detailed Execution Plan:

   Present a comprehensive execution plan that outlines your path from the product concept to market success. This plan should specify milestones and timelines, giving investors confidence in your strategy.

In the end, it is the combination of a capable team, a well-thought-out plan, evidence of market demand, and a commitment to execution that convinces investors of your ability to bring a product to success. Remember, building and maintaining this investor confidence is an ongoing journey throughout your startup’s growth.

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