Entrepreneurs must WANT to succeed rather than NEED to. Enough pressure exists without this added weight. Passion is a trait to be demonstrated and not serve as a talking point, when speaking with and presenting to investors how one presents, deports themselves are just as important as the substance and content of the presentation. The process of finding the right startup and the right investor is much like the final hand at a poker tournament: one-on-one, both parties sizing each other up playing it close to the vest.
A good deal has been said and written about investors investing in people, and on the face of that sounds warm and good, but in reality the idea/project/service must be seen as viable and fundable, and then the team must be able to execute on the sales and marketing to bring about scalability so financial projections start down the road to real revenue, break-even, and profitability.
At the request of the Canadian Government, I visited 5 cities in 7 days making presentations to entrepreneurs and startups about market access in the United States and how they should approach and interact with investors. Research and due diligence is the responsibility of the investor as well as the startup. It is crucial that the product/service being presented intersect with an investor’s background and experience. They must be able to not only understand what is being presented, but by dint of their professional experience have built up a network of strategic contacts who can be approached on behalf of their portfolio companies. Too often startups are looking for money rather than SMART money and in overlooking the latter, the result that more money than necessary is spent on business development and networking. Investors are more than just a startup’s bank, they are allies and even friends.
Startups must be comfortable in their own skins and that of their companies. This means taking stock of themselves and their companies, knowing everything about the two and being able to answer any questions from anyone, anywhere at any time. Once an investor has gotten in their head that they just might want to invest in the idea/product/service, they then need to examine the principals and gauge their abilities to: impress strategic partners, sell to prospective customers/clients, present to future investors as the company generates revenue and scales to size.
The number of investors appears to increase each year whether they be seed, angels, early-stage, venture capital, private equity, and strategic investors. The ratio of investors to investments made by the pool of investors is not linear. Investors now more than ever are being more deliberate in their decision making, especially in the area of technology and the Internet. They have become more sophisticated in the recent years – less likely to jump at the first sight.
It behooves entrepreneurs to look closely at the investment history of prospective investors and find those who are familiar with their respective industry. Such investors will better understand the product/service being presented and grasp the market more quickly. The role of strategic (industry) investors now play and intriguing role in the future of emerging companies. These investors are looking for entities which will directly affect their bottom line in a positive manner. Not only will corporations in like industries understand the product/service, they KNOW the audience, market, sales cycles and costs involved, they might also be identified as customers/licensees. Prospective exits, specifically acquirers, may indeed be the most effective investor in concert with other investors.
- Venture investment is not a zero-sum game. Investors may likely form a syndicate, and such a blend affords startups the ability to leverage numerous rolodexes and strategic networks. $MART Money trumps Money.
- Investors must gain a level of comfort and confidence in entrepreneurs that they cannot only raise money effectively, but go out on the road and sell their product/service to meet milestones and surpass projections.
- ROI = Return on Investment, not Return on Interesting – SHOW THEM THE MONEY!!!