This is a difficult subject and an easy one to understand at the same time. Just like so many of the challenges that confront an entrepreneur: conundrums and enigmas are everywhere. Take the issue of how you should spend your time today: refining your marketing strategy or trying to hire a new programmer? Which should you do? There's only enough time to do one or the other. So what's the answer in most such cases? The answer is "Yes." You must do both of them even though you aren't able to. And the consequences could very well spell the difference between raging success for your venture on the one hand, and figuring out what went wrong as you shut things down and start looking for a job on the other. Welcome to our world!
Well, now that I've cheered you up with that opening paragraph, let's take a look at some of the things involved in raising money for your venture, and also how ITEN can help you be successful at doing that.
First, let's look at the "easy part to understand," and that's looking at it from the point of view of the investor........although let me assure you, being an investor is no easy matter unless you don't care if you make money or not. There aren't a whole lot of those kind around, so suffice it to say that investors are a challenged bunch these days and for good reason: many of them have lost a lot of their wealth over the last couple of years. But for you, the entrepreneur, it's easy to figure out how to get investors to write you a check: give the them a compelling deal in a space they know something about, with a management team that convinces them they can execute, with a reasonable (read: very low) valuation, a large market potential, a growing number of happily paying customers, and an exit strategy that looks like a slam-dunk. Deliver all of that and your chances of getting their money isn't too bad. The more investors you find like that, the better your chances of getting a deal done. If you simply assume that investors are looking for a fail-safe way to make a lot of money, then you'll understand how they're likely to view your opportunity: the closer your deal comes to being perceived as risk-free, the better your chances; the more risk they think will be involved, the harder it's going to be to close them.
I know, I know, you say if they want a fail-safe investment they should bury their money in their backyard or put it in the bank. Point well-taken....except for the fact that everything is relative, and in the uncertain world of early-stage funding, investors are still looking to reduce their risk. They're looking for a high return so they know they will be taking chances, but your deal is going to be evaluated and compared against all of the other deals that investor is looking at. They're not going to invest in every deal; so the challenge is to be the one they really like.
So now let's look at how ITEN helps companies navigate these waters and what are the underlying assumptions that have led us to create the C-Level, mentoring and Mock Angel programs, which are focused directly at many of these challenges. In other words, how can you work within ITEN to create a deal for investors that is perceived to have lower risk?
Almost every entrepreneur believes their deal is a great opportunity for investors, and why not? If they didn't believe that, they'd be doing something else. There are many reasons, however, why your "great" deal might not be seen as such by an investor. For example, there's a big difference between a product and a company. Sometimes an entrepreneur has built or is building a wonderful widget, app, or what have you. But an investor does not invest in a product or service; they invest in a COMPANY. A company is a whole different animal than a product or service. The company (read: management team) is what's going to ultimately deliver value and return to its shareholders/investors. Question to ask yourself: is the management team of your company one that will inspire confidence in an investor? Confidence arises from a compelling perception that the company's management is going to deliver what the business plan says it's going to deliver. Put together a well-rounded management team with proven experience in most of the key areas needed to develop a company that will effectively deliver your product or service to the market. Sales, marketing, finance, technology, customer fulfillment, etc. are almost always among the key management capabilities that need to be in place for a company to generate some level of success. Are you expecting investors to put their money behind a venture that has gaping holes in the leadership? If so, do you at least have a very clear plan about how you will fill those holes asap after the investor's money comes in to the deal? Do you have the people identified and are they committed to joining you as soon as you get the money?
We've recently launched the C-Level program and have had 3 candidates go through that process. It is so surprising how few companies have realized what an opportunity this is. So many ITEN ventures need additional management talent, yet relatively few have expressed interest in connecting with these folks. Building a credible management team needs to be at the top of your "to-do" list if you hope to get your hands on other people's money.
Keeping our eye on the track of raising money (as opposed to self-funding ventures, which we'll look more closely at in the future), our group of about 85 mentors are another key resource for ventures. There is among them an incredible wealth of knowlege and experience that is open and available to ITEN companies through the Mentor Match. The mentors can provide all kinds of important information, advice, connections, and perspectives that come from their own hard-won experience. A very short way of stating it is that the mentors will tell you what they would do if they were you, and why they would do that. If this is your first time around as a founder or senior level exec in a start-up, wise use of mentors can help you prevent making so many mistakes, and take advantage of situations and opportunities that you might not otherwise even recognize. ITEN's mentoring program is enabled not only through the Mentor Match on the website, but also now through our Second Thursday events (see "Events"). The main thing to understand is that no mentoring happens without the entrepreneur taking the initiative and making the connection with a mentor and establishing a relationship. It's just like real life, folks: entrepreneurs who are persistent, focused and eager to learn have a better chance of success than those who hesitate to make a move. So reach out to mentors and ask for their assistance. That's what they expect you to do and why they've volunteered to be mentors. If you're someone who has a difficult time reaching out and connecting with the help that is available, then find yourself a partner for your company who can do it. Again, build your company with the aim in mind of creating a management team that can execute and that knows how to take advantage of the help that's offered.
Make full use of the information available in our "Links" section having to do with building your company and raising money. Then, when things are beginning to come together and you're getting ready to position yourself for funding, it's time to apply online for the Mock Angel Training program. When they hit the funding trail, most ventures get multiple rejections before ever finding an investor to say "yes," but rarely do the reasons for those early rejections get clearly explained to you. Most often, you'll get a "you're not in a space we invest in," or "you're too early stage," or just "we think you're not right for our portfolio," or even just, "sorry, not interested." Rarely will you get the kind of useful feedback and suggestions to help improve your pitch that you'll get from the Mock Angels. A number of our Mock Angel mentors are not "mock" and others are serial entrepreneurs who've raised money for start-ups of their own. As the reputation of ITEN has grown within the community, graduation from Mock Angels is becoming perceived as an indication of a more credible venture having less risk associated with it.
You only have one chance to make a great first impression with a potential investor. Why not take advantage of the Mock Angel Training to really focus on addressing all of the issues that would otherwise cast doubt on your deal in the investor's mind? The Training is not easy; only one company so far has "nailed" graduation on their first try, but the rigorous screening and tough love from Mock Angel Training is an unsurpassed preparation for a successful funding search.
ITEN is sometimes asked by companies who have not yet graduated from the Mock Angel program to connect them with potential investors. Please understand that the Mock Angel program is ITEN's way of preparing companies for investor discussions and as such is the pathway to investor introductions from ITEN. ITEN is quickly building a reputation with local and national investors based upon the quality of the deals that are coming out of the Mock Angel program, and it's important for ITEN as well as for the accelerated success of future Mock Angel graduates that our positive reputation continues to grow.
Last year a number of ITEN companies including graduates, current Mock Angel participants and a few other companies were invited to an Investor Speed Dating event. We got a lot of positive feedback from that event along with constructive suggestions. One such suggestion that came from a number of investors was to make sure all of the ventures participating were well-prepared for investor discussions, since less developed companies were of little interest to them. If we do Speed Dating again, we will follow that advice from the investors and limit participation to Mock Angel graduates and some of the others enrolled in the program.
Here's the wrap-up and conclusion: Learn to look at your venture from the eyes of an investor; ask for help; take full advantage of the help that is offered; build a great team, and execute with haste and with excellence. Success comes more often to those who work hard and learn quickly. Best of luck!!
Blogs
17:42:48
All Right Reserved.