Guest article by Steve Breitman | Mindful Business Solutions
In Part 1 of our discussion of Money Magnets, we listed several important things you can do to make your business more attractive to investors:
* Letters of intent from prospective customers
* Letters of intent with suppliers, vendors and manufacturers
* Endorsements by industry experts and/or celebrities
While the above are significant they’re not the whole story. The more Money Magnets you can create the more likely you will attract investor money. It’s also important to know that there other Money Magnets you can build that carry more weight than the ones listed.
Build Your Own Credibility
Investors, first and foremost, are investing in you. They would rather put their money on a good idea with a great founder behind it rather than a great idea with a so-so founder. Why? A great founder is someone who can get the job done. They’re 150% committed and are in it for the long haul. They will do whatever it takes to get the job done. A great founder is as close to a sure bet as you can get in the start-up world. A so-so founder is almost certain to fail.
What makes a great founder? It’s really a combination of things that adds up to a person that is self-assured and able to creatively take on the rigors of a start-up. If you have any of the following qualities, it’s important that you play them up.
* Previous, successful start-up experience – If you’ve done it at least once before, then the chances are good that you can do it again.
* Previous start-up experience – Maybe you worked for a start-up company, but weren’t the CEO or you were the CEO but the business didn’t make it. The former shows your experience with the start-up process the latter shows that you can learn from your mistakes.
* Previous, successful management experience – Most people start their careers working for other companies. If you’ve done so in a management capacity and have some significant accomplishments you can express in numbers then you can demonstrate that you have leadership capabilities.
* You’re confident and articulate – If you don’t believe in yourself, then why should investors believe in you? You must show your confidence (not arrogance) and explain your strategy in a logical and understandable way. I recently read an article on “Business Insider” online that discussed how venture capital firms choose who they invest in. Here’s a direct quote, “One of the reasons that a meeting doesn’t go well is that the founding team will say they expect $50 million in revenue in 5 years, but they have difficulty articulating how they’ll get to their first $1 million”.
Build a Strong Management Team
Everyone knows that even the best founder is not perfect. You cannot possibly know everything about everything. You cannot possible do everything. That’s why is critical that you surround yourself with a high quality management team. Your team mates will have skills, experience and qualities that fill in the gaps and complement yours. If, for example, you haven’t managed a start-up before, find people who have. If you’re developing software, make sure you have expert designers and coders.
Although having a strong founder is important, investors will also look at the whole package the management team brings.
Industry Disruptive Technology/Service/Product
Industry disruptive means something completely new, a new way of thinking that changes how business is done or creates a whole new type of business. Because your idea has never been done before, you have the chance to grab huge market share and garner huge revenue and profits.
When you have something disruptive that also is patented, now you’re talking about a serious magnet.
Strong Strategy That is Tied to Defensible Numbers
A solid strategy without a sound financial model is a Guess.
A good financial model without a sound strategy is a Dream.
Investors need to know that you’ve done serious market and operational research. They need to know that there is a real opportunity out there waiting to be exploited. By the same token they need to know that the opportunity has the ability to produce enough profits quickly enough to make their investment worthwhile. Unless you’ve done it for a living, do not attempt to create the strategy or the financial projections yourself. Failure to create a sound strategy that is grounded in facts, supported by the numbers and expressed in investor language will surely repel investors.
As you move forward in your capital raising activities, I’m sure many questions will arise. Please don’t hesitate to call me if you need a sounding board or some advise.
Steve Breitman | 303-359-1964 | [email protected]
Mindful Business Solutions | 1090 Atlas Circle | Lafayette | CO | 80026