How to Play the Early-Stage Investment ‘Dating Game’

Photo: Taylor Weidman

Early-stage investing is like a dating game.

You set up blind coffee meetings, you wait awkwardly, check LinkedIn to make sure you know what they look like, and then you spend an hour seeing if you are compatible.

For me, the process really is this personal. If they like the investment, then we are about to be legally bound to one another (sound familiar?). Once that first meeting takes place, the courting process begins. Many of my earliest investors did not decide to invest until about six months of meetings and dozens of phone calls later. But I get it – if it were my money, I would do the same.

Similarly to dating, a good first date does not mean it is a done deal. Even after six months of good dates, it doesn’t mean you’ll score a deal. Your early-stage investors have to become your biggest and most unconditional supporters. As a caveat, not all investments look alike and some businesses are easier to invest in than others. They are a “sure thing” with a proven executive team, early revenue, and strategic advisers and support. For me, the story was a little different. I was an unproven CEO with little industry experience and no revenue. I had a lot of passion though. My job was to get people as excited as I was about the business opportunity.

You need to view yourself as an investment. No matter how valuable you think your business is, at the end of the day, the investor is investing in you. Entrepreneurs need to really believe in their business or no one else will. They need to be a little delusional and slightly narcissistic. This has been the most valuable perspective I adopted while raising money. An early-stage investor is looking for confidence in the founder, scalability of the business model, and profit margin growth.

But here’s the catch: When an investor finally offers to give you money, you shouldn’t immediately take it. Not every investor will be the right one for you. Turning down $500,000, or even $50,000, is hard, but you need to be able to say “no.” I raised a $1.5 million seed round for Naadam Cashmere, and it took me more than a year. Over that period of time, I turned down more than half a million dollars because either the terms were not correct, the investor wanted to have too much control, or I just didn’t get along with them.

Your early-stage investors become the backbone of your future financing. They become your biggest supporters, open your network to new investors, and provide credibility. So choose wisely. This means that mom and dad are not always the best partners. Family offices and VC firms may want to take too much control. And an angel investor may love the business but not you, and vice-versa.

I pitched at three conferences and met with 35 investors before I ever raised a dime. Since the first investment we brought on, the company has pivoted a lot. I found myself expanding, developing full men’s and women’s collections, and showing during New York Fashion Week. At times, I lost focus of our core differentiators, and I compromised on the things that I told our investors we wouldn’t compromise on. My investors always believed in me, believed in the team I built, and trusted that I could figure it out. That is the bet that makes it exciting to invest in the seed stage of a business. It is a roller-coaster both financially and emotionally. We have flourished because our investors stuck with us, and above all, trusted me.

Like dating, the early days are important. Entrepreneurs need to be careful which investors they select. Not everyone is a fit, but you need to start somewhere. I found that no matter what the variables were, I always had to be the greatest advocate for my business and myself. The truth is my business would not be where it is today if it were not for the investors who took the risk and made a bet on me. Naadam Cashmere, in my opinion of course, is a game-changer that’s disrupting the fashion industry. I have spent two years singing this song and doing the dance. The dividends are calculable, but the experience is priceless.

Matt Scanlan is the CEO and co-founder of Naadam Cashmere, a socially-conscious brand that sources cashmere from local herders in Mongolia.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.