INVEST TO GET INVESTED
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.