Why your Relationship with VCs is More Than Money
How to Form Meaningful Relationships with Investors
Not all money is created equal. As a new entrepreneur, you may be eager to raise capital and find a VC that says yes. But before signing on a dotted line, have you asked yourself the right questions? Are you even ready to raise funding? In this episode of WorkSmart, we’re chatting with early Blavity investor Jarrid Tingle on the relationship between a founder and a venture capital investor. It’s more nuanced than you may think, so buckle up and listen-in as they recount their journey towards a powerful partnership.
Blavity & Harlem Capital
In Morgan’s first round of funding, she faced rejection after rejection from Black venture capitalists. Feeling discouraged, she put her nose to the grindstone and decided to bootstrap her business…until a friend recommended she raise money from social impact investors.
After her first round of funding, enter Harlem Capital. Harlem was a new venture at the time, focused on helping Black startups. Morgan quickly realized that her vision and Jarrid’s aligned perfectly, so after a memorable business brunch, they took a chance on each other!
In It For The Long Haul
No matter how promising your vision is, remember that venture capitalists are taking a risk by investing in you (and vice versa). For the relationship to work, you have to work together as business partners for that mutually beneficial outcome. At the time, Blavity wasn’t desperate for funding, but Morgan said yes to Harlem because she knew this partnership would benefit them both long-term.
In the same vein, Morgan recommends every founder have an executive coach who can advise with farsight. You need someone outside your organization to hold you accountable and point out your business’ blindspots while staying mindful of your goals five, ten, even twenty years down the road.
From Founder To CEO
When growth speeds up and your title changes from Founder to CEO, it’s time for a mindset shift. These two titles may sound similar, but leading an organization through milestones and hiccups is a whole new ballgame. Having a business philosophy is crucial and Morgan’s is – don’t sweat the small stuff.
It may sound odd, but Morgan understands the need for diversity in her management team, and not just diversity skin-deep, but diversity of thought as well. Perfectionism has no place at Blavity. The more opinions at the table, the better. And when you switch to CEO, you must find things that help your company grow besides big checks from a bougie hedge fund.
Ready To Raise?
Maybe you’re scratching your head wondering if it’s time to pull the trigger and raise that first round of funding. Knowing when the time is right can be tricky, so let’s outline some best practices. Jarrid says if you have experience in a particular sector or vertical, you can get away with raising sooner rather than later. But if you’re new to an industry, it’s probably better to wait.
In general, the longer you’ve developed your vision, the better your terms will be when it comes time to raise. So don’t jump the gun. And take feedback whenever possible.
As Blavity has grown from a tech startup connecting Black entrepreneurs to a media company blowing beyond the tech bubble, Morgan has leaned on people who share the same vision. Her partners in crime give advice that’s not short-sighted and said for the sake of a paycheck. And these partners include leaders at Harlem Capital who’ve been by her side from the beginning. So if you’re ready to raise, be mindful who you let into your circle, and make sure you’re prepared to partner for the long-haul.
Remember: work smarter, not harder.
Rate, Review, & Subscribe on Apple Podcasts
“I love Morgan and The WorkSmart Advisor Podcast.” <– If that sounds like you, please consider rating and reviewing my show! This helps me support more entrepreneurs— just like you grow and scale their business. Click here, scroll to the bottom, tap to rate with five stars, and select “Write a Review.” Then be sure to tell me what you loved about the episode!
If you haven’t done so already, subscribe to the podcast. I’m adding new episodes weekly and if you’re not subscribed there’s a good chance you’ll miss some new gems. Subscribe now!
Request for proposal. What an agency or firm will send through so a company can pitch their business to solve the problem at hand.
When cash inflow exceeds cash outflow. This is not the same thing as profit.
Revenue available for each product or unit sold after deducting the variable portion of the firm’s costs. This measurement is used to understand how a specific product contributes to a company’s overall profit. Examples of variable costs include materials used in production and factory labor.
Contribution Margin = Sales Revenue – Variable Costs
When it’s clear that a company can grow with additional resources
A system, application, or tool that a company owns and either uses internally or licenses to third parties for profit.
What happens after a company’s sale. Can include the sale or termination of a line of business, management restructuring, and location closures.
A ratio used to measure a company’s value based on net sales or gross revenue.
A company is past its growth stage and is likely looking to go public in the stock market. The company is successful and searching for additional funding to expand into new markets or acquire other entities.
People who invest before a company goes public.