April 16, 2013 Leave a comment
No1 – You Think You’re Ready To Talk To Investors But You’re Not
A lack of understanding, training and experience as to how to configure your business to attract investment is a very real issue and the main stumbling block for entrepreneurs and founders as they seek finance from business angels. Knowing how to configure and execute an investment proposition is the key component missing from most founder approaches to investors. The solution is two-fold. Firstly, in your executive summary or pitch deck, ensure you tell your investment story and not just your business story. Secondly, get some help from someone who has previously been through the process and who can make you ‘investment ready.’
No2 – Investor Criticism Now Can Lead To Investor Funding Later
It is a kind and helpful investor who despite their busy workload, chooses to give feedback and their thoughts as to why they do not want to look further or invest. This information or advice can almost be worth paying for because in the long run it could save time, effort and financial resources. Think about working with the feedback to see if some strategic changes can be made, or take their comments and try to find a way to de-risk your opportunity for the sake of any future investor conversation. If you are fortunate to have put yourself in front of several angels but received a rejection at each turn, see if there are any common criticisms. If they are all saying similar things then you have good food for thought as to why you might not be getting funded.
No3 - It’s Not All About Your Business Idea
The statistics show that the odds are heavily stacked against every milestone of business success that you are hoping to hit. From staying in business more than 3 years to procuring angel investment, the odds are not in your favour. Business ideas that have not developed into an investment proposition just won’t catch investor eye-balls. My belief is that founders often feel that if they can just hook the investor with the opportunity then all other considerations will take care of themselves. Most investors are not looking for good ideas per se but for ideas that have begun to prove themselves by gaining some form of validation and/or traction. The potential of the opportunity does not override all other considerations. There is always an abundance of investment opportunity out there for investors but an ‘investment proposition’ is different, it’s an idea or an opportunity wrapped up in as much tangible market place proofs as possible.
No4 – Validation & Traction – Two Crucial Words When Looking For Investment
Providing proof points to show that potential customers are both interested and then likely to buy is vital in gaining investor interest. These two proof points are called validation and traction and achieving them can both significantly de-risk the opportunity for the investor and increase the possibility of a deal being struck. Validation is about proving that there is market interest. Engaging a little bit with that audience and getting early feedback helps your investor see that real people or real customers believe in your offering also. Traction is about giving your investor an early and mini demonstration that real people will pay for what ever it is that you are offering.
No5 – Investor Contact – A One-Hit Pitch or Contact, Not an Unfolding Mystery
A frequent frustration when receiving incoming investment enquiries is when the enquiry is drip-fed or trickles across the internet to me via a string of emails. You may not like it but you will be sifted and most likely moved on quite quickly. Remember, investors are looking for the best of the bunch, as soon as they see the investment opportunity, if it’s not in the top bracket, then they need to drop it quickly and move on. You get one shot, so make sure it’s your best. Be prepared, be focused and be thorough.
No6 - Don’t Treat Fundraising As Just An Access Issue
I get many requests from company founders asking if I can introduce them to angel investor. The problem is that there are several assumptions usually being made when someone says this to me and they broadly fall into two categories.
1) They believe they are ready to speak to investors, overwhelmingly, they rarely are. Even if they are investment ready, they still might not be ’deal ready.’ This means configuring the deal opportunity with the aim of de-risking it as much as possible to make it easier for an investor to say ‘yes’ to.
2) The deal is good enough and if they had access then they could do a deal. A broker (including angel groups and networks) is also a gatekeeper and deal sifter. Before they will give access, a review of the proposition is needed. If it’s not ripe for an introduction then it will be rejected. I see many founders wandering around from angel to angel or angel network to angel network, hoping that eventually someone will believe in them and their propositions and say yes.