I have been thinking a lot lately about the issues that arise when one gets non-tech oriented investors for their startup. In the beginning it seems like a perfectly fine option. Perhaps it will require some more hand holding and management of expectations. The realities might be a little more harsh than holding out and finding tech-centric investors, be it angels or VCs. A good analogy I spoke with some people about last night at Startups Uncensored was that of my father. He owned two auto repair shops for 30 years and worked very hard every day to provide his customers the best auto service in town. His shop was even called Best Certified Auto Service. People referred to him as “Mr. Best” in my hometown. Now what does all this have to do with investors? A whole lot!
If you get funding for your company from tech focused investors there is already an understanding of how software is developed and how a technology company generates revenue once the product or service is ready. This may sound almost trivial but it is a HUGE game changer when compared to an investor that comes from a non-tech background. This is where the analogy of my father comes in. As a kid I was forced every summer to work in my Dad’s auto repair shop to learn what “real work is”. So I witnessed a lot of the general distrust and even downright hostility for people in my father’s line of work. Be it people thinking he was trying to over charge them or sell them work they did not need. To people committing to the work then not wanting to pay when the time came to pick up the car. Which always struck me as odd since my father was known as “the best”.
Yet the truth of it in how it relates to investors that are not technology oriented is that just as people assumed my father was trying to rip them off or over charge them due to one common humongous issue.
So just as customers did not understand the work being done to their cars and what was involved in it even after my father went to lengths to explain it to them. The same can rings true for investors that do not understand tech companies.
The tech-centric investor understands that software development does not have a beginning, middle, and end. Even if they are not knowledgeable in say the Agile development process. They at least understand that it is an ongoing process with milestones and versions. As well as understanding the need for testing and QA for example. An issue you encounter with the investor from a non-technology focused background is they either believe the product or service does not work at all. Or assume you are lying at the degree of readiness it is for the market. This creates a very slippery slope since they will prematurely stop funding and leave you potentially scrambling for additional funding. Or even worse.
My advice is to take the extra time and effort to find a technology focused angel or VC and save yourself from the hassle and heartache of the distrust and not understanding your company. Even if you are the BEST.