The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “What’s the best way for young startup owners to develop relationships with angel investors?” Is written by Peter Wilkins, managing director of Hyde Park Angelsand advisor to the University of Chicago Booth School of Business Social Enterprise Initiative.
As a first-time entrepreneur, you have to understand the monumental importance of building and developing relationships before you ever start raising capital. Having these relationships in place makes the fundraising process easier and faster, but more importantly, ensures you find the right match in your investors. Ultimately, your investor relationships are going to last the lifetime of your business, especially angel investor relationships, which often start well before your other partnerships. You need to like and respect each other, and you need to provide one another value. That’s why a critical component to developing strong and lasting relationships with investors is to build out your advisory board.
As a three-time entrepreneur myself, and an investor for the last decade, I can honestly say that the secret to getting your startup noticed and funded by investors is to surround yourself with individuals who have started, scaled, and sold their own businesses. These are the people who will help you grow your business, your network, and your access to investment.
First, if you choose the right advisors with the operational expertise to help your startup grow, you’ll have a more investable business. This isn’t just because your startup will be materially better and likely on a faster timeline to success, but because you have the top-level human capital at your side that will give angel investors the confidence to put money into your startup.
See also: Here’s the Best Way to Approach an Investor
Second, relationships breed more relationships. When you bring on advisors, they each have their own networks that they can tap for you and provide introductions. If you take the time to really think about who can add value as an advisor and constantly evaluate the quality of those advisors, you will have a trusted network of individuals willing to connect you with the investors they trust and respect. By counting on the social capital and reputations of your advisors, you eliminate some of the noise around testing out the investor market and meeting with folks who just aren’t a match.
Finally, your best advisors often become your investors. If you want to build relationships with angel investors in the early stages of your startup, ask for advice first and money later. A lot of the time, you may not even have to ask for the money because they’ve bought in. They believe in the value you’re creating and the market you’re addressing, so they’re ready to write a check.
As to how to go about building this advisory board: My biggest recommendation to young entrepreneurs thinking about raising a round is to build an advisory board of two to three people who have real expertise in their market and are ready to get hands-on early. You need to be selective and apply a strong strain of logic to your target list of advisors, and you have to be strategic in how you approach them.
I serve as an advisor to a number of startups, and I can say that the entrepreneurs I choose to work with are often the ones who not only have a game-changing business, but the ones who spend time thinking about how value can be exchanged between us.
Once you know who you want as advisors, try to determine why they would want to help you. To make a gazillion dollars? To help a scrappy entrepreneur? To give back to the community? To stay active in their industry?
You should also have a plan of action for your first meetings. Be respectful of their time while also capturing their attention. I recommend using this framework:
1. Get them excited about your business with your own contagious enthusiasm and evidence-based illustration of its value in the market.
2. Explain where you need help and how they, specifically, can fill that need.
3. Tell them you want to return the value they provide by sharing their time and mentorship—and genuinely mean it.
Once you identify how you can mutually benefit from the relationship, move forward. Always be respectful and considerate in your interactions, especially by coming prepared, having clear action items and areas of focus, and acting on their advice. From there, you can determine if they are strong-enough advisors for you to continue strengthening the relationships.