How can the right funding partners help you navigate business challenges? Lessons from 3 Rivers Venture Fair

This week is the 3 Rivers Venture Fair, the venture conference for the Ohio Valley held every 18 months. At Downtown’s bustling Wyndham Grand Pittsburgh, attendees could meet with company leaders and mingle with investors looking for a good place to put their capital. They could also listen in on sessions with topics ranging from debt financing to how to raise funds from strategic investors.

On Wednesday afternoon, this reporter attended the session “How the Right Funding Partners Can Help You Navigate Business Challenges,” moderated by River SaaS Capital Chief Investment Officer Wendy Jarchow.

Panelists Bezlio CEO Gerald Hetrick, Proformex CFO Dave Lowman, Audrey’s Kitchen General Partner Alicia McGinnis and Jumpstart Inc. Partner Bethany George told the audience why the right funding partner is the key to success for entrepreneurs.

Angel investors

If funding that comes with a personal connection is important to you as a founder, McGinnis said, an angel investor might be the best way to go.

The concept comes from years past when wealthy individuals would fund Broadway shows. Now, an angel investor is an affluent person who invests their own money into a very early-stage startup. This could be a good option for a company in need of funding quickly. Typically, these investors would get convertible debt or equity ownership in exchange for funding the business. Investing early requires angel investors to take on more risk, but also allows them to seek more return.

“The angel is someone who has a special interest in what I’m doing,” McGinnis said. “It’s a partnership. It’s almost like a sibling relationship, in my perspective, because you have to really be aligned with your interests.”

[Related reading: “Angel investors: Who are they and how do you find them?“]

An angel investor plays a crucial role in determining a company’s personality and take on the role of someone who’d prompt the founder or founders to ensure they were living up to their original mission, McGinnis said.

“How the Right Funding Partners Can Help You Navigate Business Challenges” panelists. (Photo by Atiya Irvin-Mitchell)

Due diligence

Not that every angel investor story has a happy ending. Hetrick pointed out that if an investor doesn’t do their due diligence on a company — that is, collect enough information to determine its promise and potential pitfalls — it could lead to a clash of interests and values. No matter what kind of funding you go for, he said, it’s just important to ensure that you can have a good long-term working relationship.

“The reality is that the decision to be entrepreneurial and to launch a startup and to have a startup looking to grow rapidly, is inherently a decision to suspend the immeasurable amount of your life with the people behind you,” Hetrick said.

[Related reading: “‘Do these investors share my values?’ This is your founder diligence checklist“]

Funders’ many roles

In that vein, sometimes a less emotionally involved approach works better. George explained that since Jumpstart typically provides early funding ranging from pre-seed to Series A rounds, its role is to be a resource and advisor. Sometimes that means helping a CEO make the right connections. It could also mean figuring out what the company’s communication strategy should be.

“We want to be as involved as we can be, to be that trusted resource to help them grow through both the critical times and the good times and figuring out what to prioritize,” George said. “So that can look like a lot of work.”

Navigating funding/funder challenges

One thing to be aware of is that sometimes a market won’t be conducive to the company trying to raise funding. This could make fundraising a struggle. But the panelists explained that in those situations, companies could still attempt to form connections with investors or VCs who might be willing to take a chance on them later.

“My experiences have been made easy because of my desire to nurture good relations,” Hetrick said.

Something else that could potentially cause issues? A misalignment of not only investors’ and companies’ personalities, but their goals. Whether it’s a capital provider or an angel investor, Hetrick said, if all parties involved aren’t on the same page about what they’d like the company’s long-term goals to be, in his experience, it can lead to a lot of headaches.

“There’s big misconceptions around the realities of what they want when you want to see that all the time,” Hetrick said. “The right capital partner wants the founder to be successful as much as they want themselves to be successful.”

It’s smart to be cautious

Ultimately, the panelists told attendees that it’s always better to err on the side of being informed and remember that investors don’t have all the answers or agency in funding matters. If it doesn’t feel like a good fit, you shouldn’t move forward. And when in doubt, do as much research about potential funding resources as possible.

“Don’t forget, from an entrepreneurial perspective, that ultimately you say yes or no, and so you get a chance to work with these partners and get to know them,” George explained. “It’s not just a one-way street. So talk to the people that have worked with these investors before, at the partner level at the organizational level.”