Few tips from our experience in working with entrepreneurs from around the world:
Learn from peers: look for founders and startups in your industry and geography who have got funded. Research or even better, ask them how they did it. Find out the investors names, their portfolio, their expectations. Ask the founders where they failed, learn from that.
Learn the terminology: Read a good number of how-to articles about getting funded, get comfortable with the investment process, the necessary hurdles, learn what is important for investors at different stages. Pinterest and youtube are also good sources for infographics, for a quick self-education.
Learn the standards: Browse through the different models and applications, get up to speed with the tools used in the investors selection process, search for pitch decks from companies close to your industry. Do not copy, just make sure you cover the necessary content and demonstrate you bring a solid market approach.
Learn to present your team and your story. Early stage funding is more about the team capability and passion than about the product. Show grit, vision for growth and track record.
Lets connect to work together @ The Social Partner or @ The Investment Clinic.
Do you want to cut down on time to get funding?
I would start by saying that this article will not say anything new. The quantity of articles and free templates available for entrepreneurs to get ‘investment ready’ is overwhelming. And yet, surprisingly and sadly, so is the number of businesses which need funding but are unprepared to face investors.
With every business that I coach, I experience a growing attachment as we go through the preparation together. I have a lot of admiration, respect and empathy for the hard work and dedication of the entrepreneurs, for the pain, the resilience they demonstrate to get where they are. And from this deep connection comes my message to entrepreneurs who are raising capital for the first time, want to cut down on time to get funded and speed up their growth: Invest to get Invested !
I break it down in four:
Realise that getting funded is a process not a one-off action
As a rule of thumb, it takes between 6-9 months to complete a funding campaign. It is a gradual evolution, from internal alignment to intensive public presence, requiring different types of resources – some could be in-house, but some are better found externally. Finding the right balance between internal capabilities and experts’ services is key to move forward in the funding process. This is not a plea for working with experts (I am biased here, of course), it is a plea to recognize the own team strengths and plan to fill the gaps, timely.
Take time to prepare before approaching investors
Most entrepreneurs can eloquently speak about their product or service, the technical features and quality. There is predominantly less eloquence about the market position, the market entry or the market protection, the differentiation vs. competitors, etc. There is less convincing talk when it comes to product development strategy on long term, intellectual property, etc. Way too many are not prepared to defend their valuation estimate with a solid, professional financial plan.
Accept there are costs associated with a good preparation
Preparing a business for scrutiny requires resources and time. Preparing the business for investor scrutiny is an intensive process and goes in parallel with the product and the commercial development. Obviously, the preparation puts a serious strain on the internal team. Adding external help is a must – rarely a team covers all competences required. Free external help is limited to superficial support, some marketing, maybe a little back office work. Good, efficient external help comes at a cost and failing to recognise this reality is a cost in itself: the funding process gets longer, and the cash burn is higher.
Recognize that approaching investors is more of an art than a science
There is no single proven way to secure funding from investors. The preselection made by investors is an imperfect process. In hindsight, many businesses turn out to be selected or deselected based on false positive or false negative screens. One investor’ reason to reject is another investor’ reason to fund a business. That’s to say that, in this imperfect process, where rules are sometimes unclear or unexplained, the entrepreneurs need to master the combination of the right introduction, smart supporting information, sharp insights in the investor preferences, sector and geography funding benchmarks, current information about the investors in funding mode, their past investments and track record … and more. A good strategy, serious research and segmentation work are required to define the optimal approach for, say, the top 5 target investors.
Invest to get invested! - simply a reminder for entrepreneurs to reflect on which help is best to engage to navigate the investor landscape, which is anything but transparent.
Lets connect to work here at The Social Partner or at The Investment Clinic.
Founders and hiring executives, do you know where your business stands in hiring efficiency? You probably sense the recruitment process is costly but do you actually know how much it costs? And, more importantly, do you know where you should focus to avoid even more cost caused by mis-hires?
Currently in a hiring project, my thoughts were prompted by a recent Credit Suisse study (*) estimating 50% of Swiss SMEs report recruitment difficulties, particularly in technical expertise, management and project management skills. The study says about 90,000 SMEs are acutely affected by the shortage of skilled labor while digitalization and aging megatrends will intensify the labor market constraints in the near future.
Zooming into my current project, in a small SME, under 10 employees, hiring a commercial executive required so far about 30 hours of 2 senior executives and about the same of an associate. That’s roughly more than one week away from customers, a distraction that we can hardly afford. And we are in the middle of the process – still interviewing. And, according to the study, the worse is yet to come.
The SME world is very much a DIY world, because the alternatives are perceived expensive. To validate the perception, I tried first to get a correct view of all costs and understand how others are doing.
A global benchmarking study (**) found out it takes more than 100 candidates in engineering, design and product management to make 1 hire. Filling the top of the recruitment funnel for this group is longer and more expensive – it takes more screens, more interviews – than for other roles. And this benchmark does not consider the ‘hidden’ part of the full recruitment cycle. Most of the companies do not track costs which occur before the job postings are published. A number of activities are fragmented among different people in the company and as such remain under the radar screen, although in aggregate they come to represent a significant proportion of the ‘disgraced’ overheads cost. I am thinking here at employer branding, cross-functional administrative hiring planning and approval process, writing the job description, deciding the sourcing strategy and process (partners, referrals, job boards posting, etc.). Once all these are done, begins the screening and tracking of applications, interviewing, reference checking and so on until an offer is made.
With this is mind, I am offering for comments a 3-by-3 hiring KPI dashboard that an SME can track to monitor the full recruitment cost. Knowing where it stands helps the management to make the right decision in timing, type of hiring and sourcing strategy.
1. Time ‘decision to posting’ and ‘decision to hire’
2. Number of job description reviews
3. Number of sourcing channels
1. Conversion rate ‘screens to interviews’
2. Number of interviewers/candidate
3. Number of candidates interviewed/offer
After recruitment: (3 - 6 months integration feedback)
1. New hire
2. Hiring manager & team
3. Job design impact
Would love to have your thoughts on building a simple, cost effective SME hiring model.
(*) Success Factors for Swiss SMEs 2017, Credit Suisse, August 2017
(**)Inside the Recruiting Funnel, Lever, 2017
ide the Recruiting Funnel:
Every organization needs to build financial sustainability - the ongoing ability to generate enough resources from a diverse income base, thoroughly efficient spend and adequate controls. Financial sustainability comes from the financial autonomy given by multiple and diverse sources of income, ‘no-strings attached’ funding supporting independent vision, values, strategy and decision-making.
In the nonprofit sector, the funding base diversification includes establishing business ventures, such as commercial activities and partnerships, licensing agreements. The income generated through business ventures is unrestricted revenue, the much needed type of income fueling the organizational sustainability dimensions (people and competences, infrastructure, processes).
Establishing a nonprofit business venture can benefit from adopting the Lean startup principles. In essence, the lean startup methodology helps maximize the value created and minimize waste at lowest possible cost. The concepts of minimize waste, fail fast and improve are common denominators for both startups and nonprofits. Both types of organizations suffer the scarcity of resources with passion for their mission, both focus on growth and impact, each can learn a thing or two from the other.
Having worked with both, some words of caution in lean startup adoption seem appropriate.
Perceptions of failure
Lean principles operate under different set of perceptions in the startups and nonprofit worlds.
In the startups world, the philosophy is high risk - high reward and “failing forward” or “fail and move-on” is merely a personal failure, positively recognized as promoting innovation and growth. Failure is a badge of honor.
In the nonprofit sector, failure is negatively perceived because it has high stakes: multiple stakeholders bear the consequences (beneficiaries, communities, donors, partners, sponsors). They see the failure through the lenses of unrealized social benefits.
Lean startup adoption requires good understanding and buy-in among stakeholders.
Nonprofits business ventures are ... businesses
Lean startup impacts all aspects of the business venture management and require:
Think culture before strategy
The “soft” stuff is the “hard” stuff… With all the financial reports and market positioning in place, the hard stuff remains the culture: leaders must foster the lean startup culture, explain the Build-Measure-Learn approach, grow competencies, processes and systems that leverage the value of this approach to work. Lean startup adoption means change and change happens when leaders are role modeling, where they explain well the direction and the approach, when the lean skills are developed and where the performance management is an active reinforcing mechanism.
Focus on building the culture must precede the investment in lean business venture.
Ultimately, the nonprofit business venture objective is to provide resources which lead to benefits sustainability, i.e. the benefits delivered by the nonprofit must continue to be received by communities and individuals, independent of the nonprofit programme continues. If done well, with strategic clarity, operational discipline, and open stakeholders engagement, the lean startup principles can deliver real value and ensure the scarce nonprofit resources are used effectively to deliver sustainable benefits.
Internal controls, policies and procedures should be periodically reviewed to ensure they are up to date and are functioning as intended. However there are few underlying conditions, which lead to some of the problems often found in non-profits such as excessive fundraising expenses, executive salaries, high overhead or downright fraud. Limited resources, tight operating budgets, disengaged boards, weak fiscal controls, high personnel turnover, loose roles and responsibilities and lack of timely information are creating financial and operational constraints that can be lingering for a long time until the problem is really identified.
The financial reports, even when regularly and comprehensively done, are not necessarily self-explanatory. Nonprofit accounting rules for restricted funds add significant complexity. Red flags such as absent segregation of duties, missing bank /cash reconciliation, single signatures over disbursements without oversight, lack of management control are not visible in the financial reports as such.
The financial integrity of the nonprofits Starts at mission, values and objectives, Needs the right tone at the top board policies reflecting appropriate duty of care and Works when the appropriate procedures and systems provide for clear roles and responsibilities, including adequate segregation of duties and compensation aligned to motivation.
Experienced finance professionals know that
Yellow flags are on the income statement, Red flags are on the balance sheet.
Every nonprofit board would benefit for maintaining and reviewing the flags checklist on a regular basis.
Change is not easy to many people or organizations. The discipline of Risk management provides techniques to facilitate change.
Risk management is often misunderstood as being time-consuming, impractical, difficult, or perceived as a functional compliance duty. The need for risk management is downplayed by the absence of evidence (of risks), however this doesn’t mean evidence of absence (of risks). Although risk management facilitates, rather than encumbers, the achievement of objectives, rarely it is pervasive in the organizational culture and in the decision making process.
The quality of the risk management process is a reflection of the management team and Board risk appetite, their tolerance for uncertainty and pressure for results.
How does a robust risk assessment framework look like:
The purpose of establishing thresholds is to ensure that risks are not over- or under-managed and that the organization’s resources are effectively utilized. Reducing risk involves costs; the lower the risk threshold, the higher the cost. Lack of upper thresholds signals inadequate protection and exposure to unacceptable losses impacting the organization’s ability to meet its objectives.
The Board and senior management have a shared responsibility to nurture a risk-aware culture that encourages prudent risk-taking within established risk thresholds.
I started to be interested in Monitoring & Evaluation M&E as consultant in Sustainability and social value creation at DuPont Sustainable Solutions. Working with multinationals in the extractive industries, I advised on the social risk management in large infrastructure capital projects and operations. In this sector, local communities are negatively impacted by the construction and operations – proactive management of the social impact and value creation requires early planning, rigorous monitoring and evaluation of those negative impacts while at the same time, revealing the social value created on short and long term basis, distinguishing between output, outcomes and impact. Sadly enough, not many companies were interested in employing a proactive thorough process for monitoring and evaluation.
We have adopted and successfully applied the Social Return of Investment (SROI) approach as a mean to make explicit the value creation, in a quantitative way, easy to understand for a broad range of stakeholders. I found that stakeholders consultation is paramount - the stakeholders collective input provided the necessary inputs to define the project elements and the M&E steps. Consultation revealed their needs and expectations and helped the projects to articulate ‘what’s in it for them’ to minimize the inevitable resistance.
The seven steps in SROI approach are the logical evolution from inputs to impacts, applying the theory of change and using financial proxies, to understand the effects on stakeholders. The attribution process is a critical step: the challenge is to understand well the contextual factors and to isolate the program impact. In my experience, the attribution process involved a lot of subjective interpretations, therefore, transparency and again, consultation is paramount, to obtain buy-in from stakeholders. Last but not least, independent assurance is a necessary step to improve acceptance of results and inform the next steps.
Different types of nonprofit organizations have different cost structures.
Flat and too low overhead rates, regardless of the nonprofit profile, hamper nonprofits’ operational stability, depriving them from the means to invest in essential organizational infrastructure.
At governance level, create the ground for questionable workarounds and fundamental inefficiency embedded in the efforts to fit overheads hurdle rates at the expense of the program impact focus.
A last but not least consequence is the undermining of trust between the actors on both sides of the funding equation.
Sector segmentation, correct terminology and cost classification are essential procedural steps to support a wind of change in funding. Nonprofits must step up on transparency, communication and education efforts on what-it-takes to deliver and accelerate the impact.
Pay-What-It-Takes Philanthropy, Jeri Eckhart-Queenan, Michael Etzel, Sridhar Prasad, May 2016,
NGOs are trusted because they are perceived as being nonprofit oriented, primarily helping to improve lives and reduce inequality. NGOs are, however, very diverse in terms of mission, goals, financial and organizational strength, operational vision and rigor, willingness and ability to demonstrate transparency and accountability. Public trust of NGOs comes from two main sources: performance and accountability. By performance is meant the useful social value placed on projects, which support positive and enduring change. With their increasing role in service delivery, NGOs must adopt more business practices, strengthen their management structures, become more enterprising and innovative, all whilst providing ‘better value’ for money. To maintain accountability at the standard now expected by most donors, NGOs must engage in a substantial amount of financial and programme management, monitoring, evaluation and reporting before, during, and after the end of the project cycle.
The 2015 Edelman Trust Barometer found NGOs were the most trusted among government, NGOs, media and business, but trust in these organizations fell the most over the past year, to 63 % from 66% a year earlier, with levels down or unchanged in 19 countries. 
Businesses can learn a lot from NGOs’ receptivity to shifts in social values that shape consumer demand. Consumers and stakeholders are increasingly placing a premium on social impact, the territory that nonprofits know best. These shifts provide companies with opportunities for first-mover advantages. Companies should adopt NGOs best practices to build the ability to engage communities around a common cause, promote their strategy with articulated storytelling about the social impact of their products and services, treat the community as a major shareholder to which the business is accountable for delivering value.
Most businesses produce benefits for society, however the society less and less trusts their strategies and means. Most NGOs deliver social value, however fund providers expect more business-like practices and transparency. Through partnering with NGOs, corporations can leverage the NGOs' greater legitimacy for competitive benefits while NGOs can leverage the business expertise and discipline to secure more sustainable funding.
 https://www.statista.com/Informed Public Trusts NGOs Over Media & Government