Early-stage founders are focused on their mission of growing their business. They’re extremely busy, juggling marketing, sales, production, and every other business responsibility, usually by themselves. Securing investment on top of everything else is just another equally important task on their very long list.

However, the immediate struggle they face – having the cash available to fund their idea – is the key motivator for entrepreneurs trying to find investors. This urgent need for funding, combined with the limited amount of time available to early-stage business owners, results in them focusing almost entirely on investment.

But this somewhat blinkered approach can cause founders to miss out on some of the biggest opportunities that may determine the success of their business. Although the value of investor knowledge feels a little less tangible or quantifiable in comparison to the obvious benefits of cash, the expertise and connections they bring to the table are often more impactful than money alone.

Crossing the canyon

It’s no secret that many small businesses struggle in their first few years. Ahead of them is a canyon, and they have to get from one side (product development) to the other (actual sales). The size and difficulty of this task depends on the time it takes to get their product off the ground and start selling.

Cash investment certainly allows businesses to start the journey, but they must secure the right amount if they’re to reach their goals. Setbacks in any number of areas including product development, staff turnover and ineffective marketing can cause huge setbacks to early stage startups, stretching resources further and requiring even more investment to keep the business on track.

This first stage of a business is the most dangerous and risky period they will face. By bringing further business acumen into the company - including knowledge of product development, sales, marketing, connections with relevant customers - founders have the power to make this initial push a much easier and shorter process, requiring less cash investment, and so making the early-stage journey much more achievable.

The endless cycle of investment

Another issue with sourcing only cash investment is that, on its own, it’s not sustainable. Founders can very quickly find themselves in an endless cycle of chasing investment, funding the next project, running out of money and chasing investment again.

Product development drags out as the founder spends so much time trying to find investment, and the focus shifts away from sales. Then, once the product is created, there isn’t enough of a push to sell, so founders continually try to source investment.

The issue here is, that despite money coming in, it’s not from a sustainable source. Only once a product starts selling, can businesses enter a more healthy cycle: sales, word of mouth, more sales, money invested back into product development and marketing, more sales…and repeat.

So the question is: how does a business enter that healthy cycle of sales as soon as possible and how can founders benefit from knowledge investments - not just cash?

Investor insight

Investors are in a great position to provide a wealth of knowledge to businesses. If they’re angel investors, it’s likely that they’ve successfully built a business themselves and are now looking to grow other businesses, especially within their own industry.  Passionate about business, and well-versed in the trials and tribulations of being a founder, angels will have a wealth of knowledge and experience around how to grow your business.

If they’ve an institutional investor, they’ve likely grown a number of companies from startups to multi-million organisations. Generally sophisticated investors, they will have broad experience across a number of sectors and types of business investment.

For investors, there’s clear motive to provide insights, guidance and support. By providing businesses with cash investment alone, they’re missing the opportunity to enhance the growth and increase the profitability of the businesses in question. The benefit of cash only investment can hold back founders and minimise returns for investors.

There are three main assets investors can impart other than cash:

• Corporate connections

Investors will likely be able to put you in touch with potential customers, marketing teams, industry leaders and business advisors that they, or their portfolio of companies, may have used. 

• Industry knowledge

They’re also most likely investing in your company specifically because they have experience in your particular industry. They will have valuable lessons to share with you including mistakes they may have made and the very best routes to market. Having this kind of industry-specific guidance can prove invaluable.

• Business acumen

It’s unlikely you launched a startup to do the ‘back-end’ jobs of sales, marketing, HR, logistics etc. The focus of your passion will be your ideas and your product and you will also undoubtedly be time poor. Investors can provide the business knowhow and bandwidth to allow you to zero in on your main responsibilities as a founder.

It’s not just investors that can provide the above too. Founders should seek as much support and advice as possible from other founders, advisors and non-executive directors to accelerate the growth of their business. 

Conclusion

By actively seeking guidance, advice and expertise along with investment, founders can flourish in the early stages of business, rather than struggling on the journey in front of them, constantly chasing investment and never getting to market. With a huge community of Investors looking to add value in terms of both equity and knowledge to maximise their return on investment, this pathway can be one of the most beneficial to startup growth.