I’m an investor.
I don’t invest money. I invest time, effort and the value of my connections to funding sources.
During a slow week I will see a dozen or more business plans, executive summaries and funding requests. And just like contestants on a reality show, very few will make it to the next round. Only the best will be presented to a lender, investor, venture capitalist or potential JV partner. (For the sake of simplicity I will simply say “lender” or “investor” interchangeably from here on. No matter if it’s debt or equity you seek, success and failure hinge on similar elements.)
Most of you will first present your idea in writing. First impressions are important and neatness absolutely counts. If you’re weak in that area, get some help.
Creating a solid presentation for your company isn’t rocket science, but to be very blunt, most of you get it wrong. What follows are some simple do’s and don’ts.
Do: Watch the television show Shark Tank (#SharkTankWeek). You’ll gain some valuable insight into the thought process of those who hold the purse strings. You’ll also see much of the nonsense they must endure. Try to mentally detach yourself from your company and pretend that it’s YOUR hard-earned dollars that are being asked for.
You’ll see good companies and ideas that don’t get funded. You’ll also see seemingly wacky ideas that meet with success. Those who don’t make a deal, fail for two reasons:
These entrepreneurs will invariably hear excellent advice on how to alter their approach. The voice of experience seems to fall on deaf ears and the principals walk away, apparently unaware of how close they were to success. Persistence is a virtue; stubbornness is not.
I frequently participate in conference calls with a seasoned lender/investor and my clients. One of his standard questions is, “What are you willing to give up?”
I know from my dealings with this investor that he isn’t out to gouge or steal from anyone. But he doesn’t invest for philanthropic purposes either; he seeks a reasonable return which must be balanced against risk. An investor’s valuation of your product may be a painful reality check. I’m not advising you to sacrifice more than you need to or even to accept the first offer you get. I’m simply pointing out that a wise investor is typically more objective than you.
We realize that you’ve poured blood, sweat and tears into your business, and your passion is important. But an investor must be, to a certain extent, dispassionate. The investor is going to pour in neither blood nor sweat and had better not pour in tears. What the investor pours in is cash. If you’re going to obtain cold hard cash, be prepared for cold hard reality.
“Keep it super simple” or “Keep it simple, stupid” may be the oldest axiom in business. It may also be the one most often ignored.
I recently received a funding request for what should have been a straightforward commercial real estate deal and some working capital. Yet, the business plan and executive summary labored on for 17 pages! Since I knew the guy, I waded through it anyway and determined it might have legs. I emailed it to one of my primary sources and immediately got him on the phone because I knew what his initial reaction would be: exasperation. There was some meat on the bone, but there were just too many bones!
Most lenders would open a document like that and either grumble or chuckle as they shuffled it to the bottom of the priority list.
Make the key pieces of information easy to find and digest.
Let me say this again: Make the key information easy to find and digest!
(There is a “Don’t” here as well: Don’t believe the old saw that if you can’t dazzle them with brilliance, then baffle them with b.s. An investor’s stock-in-trade involves a finely tunes b.s. detector. Feel free to dazzle them with brilliance.)
Do: Set your goals in concrete, and write your plans in sand.
The concept of “pivoting” has received a lot of attention lately and for good reason. Any young or start-up company needs to be agile, adaptive and responsive to feedback.
Think of it in the terms of how you operate a car: Assume a straight road with a fixed point at the end. That’s your target. Point the car in that precise direction. Press on the accelerator. And then hold the steering wheel perfectly still. I dare you to try it. I’ll bet you can’t. Because to do so requires not only ignoring your self preservation instinct, but also ignoring the constant feedback you get from the steering wheel. You know as well as I do that if you don’t make constant adjustments with the wheel, you will crash.
When someone sends me their business plan or executive summary, one of the first things I do is look for a date. I want to know how long they’ve been looking for funding.
If you’ve taken your proposal to lender after investor with and gotten the same response, it’s time to stop lamenting and complaining about lenders. Rather, it’s time to change your approach. These changes could include refining your sales strategy or simply taking a smaller swing of the bat.
If you’re consistently getting the same feedback, then listen and respond proactively. That will lead you to success.
Don’t: Get off-topic.
Please don’t include in your executive summary things such as: your past business failures and that you were a victim. We feel for you. We love you and wish you all the best. Victim-mentality does not attract funding. Sorry. Don’t include in your executive summary or presentation long narratives about your wife dying of cancer (seen that more that once believe it or not). Again, we’re sorry you had to deal with that, in fact I can’t imagine your grief. But it does nothing to get you the capital you need to move forward.
In fact, the phrase “move forward” is the key. It’s not ultimately up to me, lenders OR investors for you to move forward. It’s up to you. If there’s due diligence yet to perform, do it. If you need to increase sales on a shoestring budget before your company can truly claim its slice of the investment pie, then stuff envelopes and hit the streets! No one will lend or invest out of sympathy.
When you’re truly ready – and I mean truly ready – to take your company to the next level, you will have investors competing to participate.