We currently find ourselves in an uncertain market where a large number of companies are looking to raise capital as they look to survive in the current environment.
While there is capital on the sidelines, it is being more selective about the opportunities it pursues. Although some groups are in the capital allocation business, others are focused on being value-add to the companies in which they invest, bringing not only capital but taking the time to offer their expertise and finding ways to leverage relationships or other skills that may benefit the company. Meanwhile, founders work hard to ensure their companies shine and stand out in order to attract a well-rounded investor base.
Once a company has engaged with strategic investors, what sets apart the ones who succeed from the ones who struggle? What’s the best way for a founder to make the most of this opportunity and achieve the best outcome?
Counter to what many younger founders may think, the answer isn’t the tired “fake it ’til you make it!” maxim. As someone with decades of experience investing in private equity and venture capital, the number one piece of advice I would give all companies is to have open, honest, two-way communication with investors.
This can feel especially tough when a company encounters hurdles. Especially in the current market, founders are facing a variety of different challenges, and a natural response is to attempt to sugarcoat or mask those problems as a company works to move through them. In short, many founders falsely view admitting problems as a sign of weakness.
The reality is that investors not only know there will be challenges for any growing company — they fully expect them. Things often don’t go according to plans, and recognizing and being willing to discuss challenges is a clear sign of strength in a leader.
In fact, because hills and valleys are a normal part of growing any company, it can be concerning to an investor to only hear good news. Investor-founder relationships thrive on candor and transparency — open discussions about how a company is approaching challenges and being receptive to advice and counsel.
That last part is key. In addition to falling into the trap of thinking that all news must be good news, another pitfall that founders find themselves in is believing they must always be the smartest person in the room. Investors love innovative and forward-thinking founders who seek out creative ways to solve problems, but we also love working with leaders who are excited to take advantage of the experience and perspective we have to offer.
In my role, we seek out companies that are actively working to solve problems. Once we pinpoint the right company, we never expect them to go it alone. Our goal is to work with them to identify any struggles that are preventing them from moving to the next level.
The goal of establishing these problems isn’t to cast judgment on them; it’s to have open discussions and offer expertise on moving around or beyond them. As an investor, we are always fully aligned with the founder in working to achieve the best possible outcome.
We have a virtual treasure trove of resources — from leaders with expertise in relevant fields, experience guiding founders who have faced similar challenges, and relationships that we can draw upon to help achieve solutions. In fact, founders should insist on working with investors who have more than cash to offer; utilizing the unique skills and networks an investor brings to the table is equally valuable.
It’s a really great time to be a founder. Once you’ve found the right investor, work hard to build a strong relationship with them. By working together in a way that’s open, honest and receptive to new ideas, you’ll be able to celebrate shared success.
Steve Lebowitz is a Senior Managing Director at Two Bridge Capital. With over 20 years of real estate and senior housing investment experience, Lebowitz has been involved in over $1B of acquisitions, complex financing projects (traditional and HUD) and asset management.
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.
