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3 questions founders should ask investors in the first quarter of 2023 • Alaska Green Light Blog

3 questions founders should ask investors in the first quarter of 2023 • Alaska Green Light Blog

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Talia Rafaeli Contributor

Talia Raffaeli is a partner with compassa European early-stage venture capital fund investing in digital transformation technologies within the built environment and Industry 4.0 domains.

Investors and entrepreneurs entered 2022 with bright eyes and optimism as startups raised nearly $13 billion in the first quarter, making it the fifth-highest quarter for funding on record.

However, lately there has been increasing talk of a withdrawal of global venture capital. It’s clear that money isn’t flowing as freely as it used to, and that has changed the landscape for ambitious startups looking to build and scale their offerings.

However, a challenging economic climate doesn’t necessarily mean that startups should take the first offer, settle for lower valuations, or attract investors who have different values ​​and ambitions for the company. It is now more important than ever that each party comes to the negotiating table with clear questions and expectations.

Here are three clear but fair questions founders should ask their potential investors:

What value can you offer other than money?

It’s important to remember that VCs don’t have an endless pot of money – they are at the mercy of their LPs’ liquidity.

Most investors worth their salt will demonstrate that they bring more than deep pockets – values ​​such as industry expertise, business experience, or a global network. Founders should be confident in proactively inquiring about what an investor can offer, particularly the networks and introductions that can facilitate potential investors.

There is a significant difference between an introduction facilitated via email and a clear handover to someone who has a close relationship with the investor and is based on many levels of trust. Many investors pride themselves on having a solid and lucrative contact list, but not all introductions are created equal — a LinkedIn profile rarely demonstrates the depth and quality of an investor’s network or knowledge.

My advice is to be clear about your commercial goals and urge potential investors to offer names of individuals or organizations that will make the impact you want. For example, we recently introduced one of our portfolio companies to an $80 billion infrastructure company with whom we had developed strong relationships to set up pilot projects in a number of regions.

Interviews shouldn’t just be connections; they should have tangible commercial implications.

How safe is your cash?

It always surprises me how many founders believe that VCs are sitting on mountains of money that they can distribute at any time.

It’s important to remember that VCs don’t have an endless pot of money – they are at the mercy of their LPs’ liquidity. It is therefore useful (and necessary) to have answers to three key questions:

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