Startups that appear on TV show “Shark Tank” have one advantage over the rest of us. They don’t have to do much research on the investors, aka sharks. Any of them would make a valuable investor. Companies will almost always take their call. Everyone knows these sharks have great success in getting big results for startups.
But not every investor is a shark.
Investors do more than write a check. With a good investor, your startup benefits from their connections, knowledge, experience, and business skills. With a bad investor, you have someone who gets in your way, requires valuable time and effort to manage, and can steer you down the wrong path.
That’s why it can be risky to accept any offer that comes along. Connecting with an investor is like a marriage. It needs to be a good fit for both the startup and the investor.
Researching potential investors is essential – you don’t want to waste your time with the wrong people. Here are some tips for doing that kind of research using LinkedIn.
Evaluate the investor’s LinkedIn connections
LinkedIn stops counting connections at the 500 mark, so that’s a good number to use as a measuring stick. The more connections someone has, the more resources your startup would be able to access.
Of course, not all investors are neck-deep into LinkedIn. But many network incessantly and do a good job of connecting to the people they meet, so you can use LinkedIn to gauge the quality of their connections.
What kind of people does the investor know? Do they know the same people you do? Are they connected to successful entrepreneurs, media, other investors, influential people in the startup community?
Can they help build your business? Do they know potential customers, vendors, partners, employees?
What about competitors? If you see they are connected to competitors, dig deeper to see if there’s a strong relationship and whether they work together. That could be a potential red flag.
Read up on the investor’s background
Investors have to start somewhere, but it’s preferable that your startup isn’t an investor’s first. Review the person’s experience for positions held, length with company and responsibilities. Look into the types of businesses they’ve helped and how the businesses fared. Find connections at the companies they’ve invested in to ask about their experience with the investor.
You can also check LinkedIn groups and communities related to your industry. There, you might find people who know the investor, and can tell you about the person’s personality and the ability to work with others.
Look at the LinkedIn groups on the investor’s profile. What kind of groups are they? What topics and industries? Are they relevant to your startup?
Scan the investor’s skills and endorsements. You can get an idea of what the person’s strengths are if there are enough endorsements. Check out awards, organizations, articles, presentations and other media. Do they have patents?
Media coverage and speaking opportunities give you the opportunity to learn about their philosophy and see if it matches yours.
Read their LinkedIn recommendations
Are the recommendations recent? Are they in roles that would help your business? What impression do you get?
Take a look at the recommendations the person wrote for other people. You might be able to get a feel for the person’s style and personality.
Remember LinkedIn allows users to show or hide recommendations, so it’s easy to pull the ones that sound less than stellar.
Checking an investor’s references for basic LinkedIn accounts
Before digging in, beware there’s a catch. LinkedIn’s reference feature can be used or abused. In “On LinkedIn, a Reference List You Didn’t Write” from The New York Times, Natasha Singer explains how misusing reference-related features has cost people a job.
Here’s how references can be useless. The lawyer in the story did a reference search on Singer. He found 43 people in his network who have worked at The New York Times. Singer only knew four people on the list; none have worked with her. Ask the reference how they know the investor and whether they’ve worked together.
Those using the basic account can cull the information albeit with more work. Still using these methods can create a decent list of people to contact. Let’s say I want to vet an investor. I search for him to pull up his profile and look for “How You’re Connected” to see what connections he and I have in common.
Another option is to use the “People Similar to …” feature. This appears on the right-hand side of most profiles. You can also find more similar people by doing a search for a person’s name. Increase your chances of finding someone who knows the investor by selecting items in search options. Play with the different options until you get what you need.
Checking an investor’s references for premium LinkedIn accounts
Premium account users have it easy. Search for anyone and the search results let you “Find References” for a person. Reference search finds users in your network who may have worked with the investor. Narrow the list by using search options.
After you create a short list, you’ll want to see if the investors are people you want to connect with on a regular basis. It’s a long-term commitment, one that could sour quickly if you don’t like the person.
An example of a strong investor LinkedIn profile – Glen Hellman
Glen Hellman’s LinkedIn profile is a good example of what you’ll find in a qualified investor. He has more than 500 connections from a variety of companies and roles.
His awards include being the No. 1 ranked angel investor in the U.S. and a Global 100 Mentor. A quick glance at his skills reveals all the things you’d want in an investor: start-ups, strategy, leadership, and venture capital.
As a Vistage International chair, he led a group of CEOs and has three recommendations in this role. One says, “Glen is a respected, seasoned business executive who is a great mentor to entrepreneurs and CXOs looking to walk in the shoes he’s traveled in.” That’s the kind of person most would want to have on their team.
He’s also a cybersecurity startup mentor. Although he doesn’t list a lot of groups, the other factors more than make the case. The right investor may not be using every possible aspect to their LinkedIn profile. The point is to look at the different components to see what kind of story it tells.
Of course, whether Glen is a match for a particular startup depends on the industry, customers and needs.
You improve your chances of landing Glen, Mark Cuban, Lori Griener, Daymond John or any other shark when you use LinkedIn’s resources to help your startup make a good list of suitable investors. The rest is a matter of meeting them to see if it’s a match.
How would you check out an investor using LinkedIn?