Often businesses are built out of the need to make money. Whether through super sales or via merger / acquisition or simply a mix of the two there comes a time when a business has the desire to go bigger and more global and with that comes the need for an influx of fresh capital.
Some businesses follow the "rich uncle" model which basically means "I have someone close to me who is willing to put in a few bucks" while others go the traditional banking route (loans, lines of credit) and others identify and try to utilise state and local government resources and others simply begin the arduous process of a series A or stage 1 placement with a venture capital firm. There are PreSeed, Seed, Stage 1, Stage 2 etc...each focusing on a different part of a company or concepts life. In fact there are some that try all of the above.
The latter process is an enormous undertaking and the ice is very thin. Each step can mean personal defeat, professional defeat or financial defeat. NO! NO! NO! will heard and one has to prepare for this and prepare their business plan as best as possible in order to at the very least prepared for what may or may not happen.
That being said my experiences show their are dozens of hot button points that need to be addressed and usually one is borne from the other. However in seeking "funding" as I will group all of these exercises I have narrowed this down to nearly a dozen points.
- Focus on Creating Value: The head, the heart and the gut all give signals on which way a company and a funder will go. The heart is what most "funders" claim to be after. At first one may think "the head" - how smart are these business people? the reality is it is important but the heart of the organisation is critical. The heart includes: the team, the technology(if any) and the company(Vision to change the world). What you must demonstrate is you are creating value- how your product or service WILL change the world!
- Differenciate: Make it VERY clear that what you do that provides a compelling advantage - why is this better than everyone else´s ? Why is my team better designed to accomplish this? Why? This is very critical as it most funders will quickly compare you to something in their comfort zone so they can gain control of the conversation thus pushing you into a testing lab area of discomfort that is like nothing else you have every experienced before.
- Be an Innovator: Not an inventor! VCs are not interested in hearing what you invented or in inventors. Show your "toy" and how it supports pts 1-2 above plus can change and is a flexible depended on market demands.
- Prove Your Talent: Demonstrate that you can design/innovate and sell! Sell yourself, the company, the team and your product.
- "Foundamentals": As I call them... have your business model in place. Founder stock allocations and restrictions. It is best to invest in a "good" corporate attorney to help you draft this. Do not "swipe" information off the net that can be used instead of a veteran and cagey corporate attorney. Look you are looking to raise LOTS of money...invest a little money and get a better shot at getting the "lots".
- Intellectual Property: Make sure you have explored this. Did you innovate or design something special? CYA (Cover your A$$). Many corporate attorneys can refer a patent attorney. The reality is... do you want to give someone else a chance to realise your "hoped" success by giving them your technology and with no chance of a windfall for you?
- Get Your Numbers Right: Have data on the market size and the potential. Prospective Revenues, Sales Cycles and Cost of Customer Acquisition.
- Valuation Expectation: This is often the biggest blunder most make when seeking funding... "I am worth $100,000,000 because of the market potential"... The reality is you need to have an expectation and this is based on a number of factors and professional assistance. Various houses of "finance" can assist at a fee of course. The truth is turn the table and tell the funder: That is your job to determine what I am worth. It is their job!
- Surprise Them: Positively not negatively! Over promise and over deliver. Most under promise with the goal of over delivering! Thinking conservative is the "gut" feeling in human nature but the reality is think big - deliver big!
- Be Intolerant: Always have the sense of urgency! Do not tolerate mistakes, delays. These get in the way of success. It is the nature of the entrepreneur to try and try and try again... Steven Jobs was relentless in maintaining his vision. Do not allow others to be "tolerant" of failure.
- Turn the Funders into Evangelists: Make them feel and see the value. Connect with them, use their lives as examples of how your company can change their lives.
- Tell The Truth Well: Be open and honest about your business! Not about the intra challenges of personal issues with some people or the "dirty laundry" but focus on what you do best and how it affects your people!
- Funders Are Not Looking For Your Best Interest: The reality is... they say they are but they are not. They will invest, they will gain some control even if they buy $1 of stock as you have a duty to provide them with information and answers! They are looking for an exit in 3 years or less so the "plan" needs to be closely tied to this. Remember they are not life partners, if you want to have a long term happy company, a family business then you are in the wrong business. Use other ways to raise funds.
- Be Prepared for NO! Intel Inc. was told nearly 200 times by funders NO not interested. You will hear NO NO NO - keep going. Not all funders are perfect for you. You need to find the right funder and it is not one that has invested in other companies like yours. Conflict of interest even though your gut says "they know my customers, they know my market and product"..
- Be Careful of Consultancies trying to "help you raise money". Follow this simple model: No CURE No PAY
