Why investors with an entrepreneurial past are essential to the success of a start-up

In this article, I want to focus on an important trait that some investors possess: an entrepreneurial background that allows them to form strong connections with startups and better understand the “pains” and challenges that new founders face.

Based on my personal experience as an businessroundups.org, I want to highlight the most important aspects of communication with startups and why your entrepreneurial past makes you a little different from others.

Related: 6 steps to finding the right investors for your business

Speaking the same entrepreneurial language

When communicating with founders, having an entrepreneurial background is extremely helpful. Founders feel it, even in the way questions are worded, and they often emphasize that such questions have never been asked before – questions are tailored with a deep understanding of the topic.

And it is not only about technology-related topics, but specifically about business management, such as sales funnels, marketing strategies, product market fit and customer development. In addition to managing companies, having personal experience in building accelerator programs and all of Silicon Valley’s leading methodologies, which we have integrated into accelerators for many years to make them more effective, can improve communication between investors and founders.

With my experience building 42 accelerators and working with 1,500 alumni startups, I’ve encountered familiar patterns, challenges, and complex situations when working with founders. We have found solutions together with startups in the past and now I take that experience into my current communication with founders.

Entrepreneurs then – investors now

Investors with an entrepreneurial background bring valuable insights and expertise. They have first-hand experience navigating the challenges and uncertainties of building a business, helping them better understand the struggles and aspirations of startup founders. Here are some great examples from the corporate world.

Mark Suster is a well-known voice in the investment world, he has written extensively about investing in startups and building them on his website, Both Sides of the Table. He possesses a unique ability to discuss both sides of the table because of his experience as a two-time businessroundups.org, having sold one company to a French company and another to Salesforce. He is currently a partner at Upfront Ventures in Southern California (SoCal).

Considered a pioneer in the tech space, Marc Andreesen founded Netscape, Opsware, Ning and now his investment company Andreessen Horowitz. He is an expert on tech trends and a frequent speaker on angel investing.

Reid Hoffman is one of Silicon Valley’s most sought-after opinion leaders. He is widely recognized for founding the largest business social network in the world, LinkedIn. In addition, he has successfully translated his entrepreneurial acumen into profitable investments, holding significant stakes in companies such as Facebook, Airbnb and PayPal.

Related: 5 questions to prepare for your meeting with investors

Benefiting from an entrepreneurial past: from coaching to strategic planning

An investor with entrepreneurial skills can provide valuable support and guidance to a startup in a variety of ways. Here are some ways such an investor can help:

• Fundraising strategy. An investor’s primary role is to provide funding to the startup and help them with the future fundraising strategy. This financial support is crucial for the startup to develop its products or services, hire talented employees and scale its operations. With their entrepreneurial experience, the investor can assess the startup’s financial needs and provide strategic advice on funding allocation. In addition, it can guide the founder towards a better fundraising strategy and preparation for investor meetings.
• Strategic planning. An investor with entrepreneurial skills can help the startup build a solid business plan and set strategic goals. They can provide insights and expertise gained from their own entrepreneurial background, helping the startup identify potential challenges and opportunities. Together with the startup founders, they can develop a roadmap for growth and devise strategies to overcome potential challenges.
• Shared perspective. I think this is one of the most important ways of communication, and here’s why. An investor with an entrepreneurial background can better understand the challenges and opportunities of startups. They have likely experienced similar issues such as fundraising, market entry, scaling and operational issues. This shared perspective helps to build rapport and empathy with startup founders, fostering better communication and mutual understanding.
• Guiding and coaching. Startups often value investors who can go beyond providing capital and act as mentors or coaches. An investor with an entrepreneurial background is ideally suited to fulfill this role. They can provide guidance in overcoming challenges, making critical business decisions, and navigating the ups and downs of entrepreneurship. Their ability to draw on personal experiences can be particularly influential in helping startups succeed.

I love seeing founders who are passionate about their startups, and our fund sometimes goes the extra mile to advise startups even if they haven’t received any investment from us. It is important to remember that when rejecting a startup, there is always the possibility that it will return in the future after significant improvements in key metrics. Therefore, it is in our interest to provide additional advice on what steps they should take to raise funding.

Quite often I get requests from founders for personal advice. We thought about how to turn this demand into something beneficial for startups and society and came up with a very good solution. We have decided to combine business and charity by launching a project with the Podari.Life charity fund called “30 min/lunch with VC to save lives.”

Relationship building

Investors with an entrepreneurial past can use their extensive network and connections to open doors, make introductions and facilitate strategic partnerships for the startups they work with. This network can play an important role in helping startups access resources, industry expertise, and potential clients.

For example, the CEO of one of our portfolio companies, PicUp, recently embarked on his first visit to the US. He took the initiative to go on an extensive tour, visiting key states and getting in touch with potential partners and investors. I understand firsthand how challenging it can be to establish new connections abroad, especially in the US and especially in Silicon Valley, which has no analogues in the world. With this in mind, we decided to help by pre-engaging the company with investors and key players in the Silicon Valley innovation ecosystem.

Related: The Things Successful Leaders Do and Don’t Do to Build Relationships

What matters most

In summary, it’s not just the entrepreneurial experience of investors that founders appeal to. Rather, their experience in various roles within a company allows investors to take a broader view and help early founders avoid common mistakes as they build the next big thing. After all, venture investments are a long-term relationship, and you want to build partner-like relationships with people you’re likely to work with for the next 8-10 years until you leave.