3 Little Known Reasons Why Angel Investors Fund Entrepreneurs


 

When most entrepreneurs start out and realized they need funding, they are typically presented with three options.

The first is debt financing, which is typically in the form of a loan from a bank.

The other two funding options are typically in the form of equity, and they are 1) equity from individual or "angel" investors and 2) equity from venture capitalists.

Importantly, when considering these two sources of funding it is important to understand that most venture capitalists will not invest in companies that have not achieved "proof of concept" (which generally means a working prototype and/or revenues). Also, venture capitalists generally only invest in companies that have the potential to be valued at over $100 million within five years.

These criteria make venture capital inaccessible to most entrepreneurs. Furthermore, angel funding is often a better option since it is much easier to attain.

Consider these statistics:

  • In an average year (according to the Center for Venture Research at the University of New Hampshire), 250,000 angel investors will fund 60,000 companies, giving them $20 Billion in total.

  • Conversely, in and average year (according to the National Venture Capital Association), there are only 800 active venture capital firms, who fund only 4,000 companies, also giving them $20 Billion in total.


So while venture capitalists write much larger checks, 15 times more entrepreneurs raise funding from angels.

So why do angel investors fund entrepreneurs?  The common answer is that they hope to get a solid return on their investment. Obviously, investing at the earliest stages for a company that eventually goes big can earn the investor 100X their money back or more.

However, there are three lesser known, but equally important reasons, why angel investors fund entrepreneurs:

1. They know, like and trust the entrepreneur. Like with friends and family investments, sometimes angels know and trust the entrepreneurs and want to help them succeed.

2. They feel they can add real value. Many angels have lots of relevant experience that can help the companies they fund, from experience hiring staff to connections with key potential customers or suppliers. If angels can see their involvement adding a lot of value to the company, they might be very interested in investing.

3. Sometimes the angel wants or likes the action. Simply put, angel investing is exciting. It is generally a higher risk/higher reward version of the public stock markets requiring a more entrepreneurial analysis which is highly intriguing. This is particularly the case when the angel investor is a retired entrepreneur or executive.

So, if you are an entrepreneur seeking funding, keep these motivations in mind when you identify, approach and speak with angels.

Because understanding them is often the difference between whether you will raise money or not. Finding angel investors is also easy if you know where to look.

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Business Growth: If They Can Do It, We Can Too


 

Above all else, business leaders are tasked with solving the fundamental challenge of growth.

Growth in the form of increased revenues and profits, of more and better assets, and of more organizational “innovation” capacity and results.

This is extremely challenging work.

The challenge starts at the top, with “revenue regression" - the statistical tendency for most companies to grow as the economy does - just a few percentage points per the average in most developed economies.

Then there is the unrelenting “bottom line” pressure brought on by technology and globalization - the “competitors are everywhere and available to buyers at a click of a button” phenomenon that presses down prices and margins.

And in between lies the leadership challenge of innovation.

How do we "keep up" and "ahead" in all aspects of our business?

With the creativity and efficacy of our marketing and branding, with new product and service development, with an invigorated and inspired company culture?

And oh yes, for smaller businesses how do we do all this in the face of limited capital, of the "hamster wheel" pressure to just live to fight another day?

But while the challenges of growth are everywhere, so are the answers to overcome these challenges everywhere too.

And most of them can be found in one of the buckets of inspiration, information, and collaboration.

Inspiration. Every day in the financial and business news are awesome examples of business leaders “getting it done” - reporting record revenue and profit growth, rolling out new products and services, raising tens of millions of dollars, selling their companies for many multiples of that, and the list goes on.

Our first reaction to hearing of this success should simply be: If they can do it, we can too.

Here is an easy suggestion: Let’s consume a lot less of the gossipy soap opera called political news...

...and a lot more business news: tales of professional success as is featured on CNBC, in the Wall Street Journal, in Fortune, Fast Company, Entrepreneur, and Inc. Magazines, and on countless websites, podcasts and social media postings.

And as we get inspired by it all, we naturally get better and more informed.

You see, while I am proud of my UCLA MBA, a 21st Century MBA gets re-earned each and every business day.

How great is this? Any and every needed growth idea for any business is there for the having if we just take the time to look for it in the places mentioned above.

So with just a bit more inspiration and innovation our results will improve.

But for the kind of growth that gets us featured on CNBC, or on the cover of Inc., for that we need to stir in the magical element of collaboration, so wonderfully defined as "the action of working with someone to produce or create something."

Yes, great collaboration starts with “the action,” the recognition that business is not a spectator sport nor a game of perfect so let’s get our hands dirty and “fail forward” while...

...“Working with someone,” recognizing that no matter our technological progress we are all at our essence hunter-gatherer primates that thrive tribally, with those tribes being of our fellow employees, our customers, vendors, partners, service providers, our community...

And with them, we “produce or create something.”

We market. We sell. We innovate. We bring beautiful things into the world.

We make money where before there was none.

Inspiration. Information. Collaboration.

So many business leaders do these and more and grow and win every day.

We can too.

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How to Find Great Outsourced Help Online


 

There are three main benefits I typically derive from outsourcing:

1. Cost savings. I'm often able to pay less for jobs I outsource, particularly if I outsource them to people in lower cost-of-living states or countries.

2. Reduce overhead. Usually I outsource projects that are not full-time or that I am able to easily stop if they aren't working out as planned. This reduces my overhead (and allows me to scale down as needed) since unlike a full-time employee, the outsourced people are not a fixed expense.

3. Supplemental work at night-time hours. When you outsource overseas, it often provides great timing of workflow. For instance, in one company I ran, I would create tasks during the day, give them to my outsourced team in India, and they would be done by the time I arrived in the office the next morning.

However, for outsourcing to work, you need to find the most qualified people to which you outsource.

The key to this is to start by getting the largest pool of qualified outsourced providers to apply for the project you need accomplished. Because you want to have as many people as possible to choose from.

Even if you only hire one, you can go back and contact the same pool of talent for future projects. Consider applicants as being in your "rolodex" of people to call.

To help you do this well, here are some tips to consider when finding and judging outsourced people to complete your projects.

Choose Your Outsourcing Platform

There are many sites in which you can find outsourced providers for the tasks you need done. Among many others, these include Craigslist, ODesk.com, Guru.com, Elance.com and 99designs. Some of these sites focus on certain types of outsourced projects like technology and design, while others allow you to find people for all types of tasks.

The process of posting a project is very similar on each of these sites, but there are also minor differences to get acquainted with as you go -- worry about those later and follow these basic steps.

Create a Clear Project Title

Include the work to be done, on what, and in what industry. For example, "Help Making Ebook" could mean anything from research to writing to editing to cover design. Compare that to "Writing 10,000 Word Real Estate Ebook."  The latter will be more likely to catch the eye of writers and providers with real estate knowledge.

Create a Clear Project Description


This sounds simple enough, but you should try to answer as many possible questions as you can, which means addressing certain areas, like:
 

  • The scope of the project. In the above example, requiring a 10,000-word Ebook to be written vs. 20,000 words would be helpful information for applicants to know. This helps them estimate the time it will take to complete and therefore their bid for the project. If you are paying hourly, it will help prevent misunderstandings later.

  • Software needed. Make sure they at least have Microsoft Word and Excel, if that's what you use. Other software is industry-specific, like Adobe Photoshop among graphic designers.

    You may or may not know what software is needed for things you don't specialize in, but you will soon enough. All other things equal, choose the person who already has the best software for the job, as you'll get better results.

  • Programming languages. Some website projects require that the provider knows certain programming languages besides standard html, such as PHP, AJAX, etc. In these cases, it's better to post "PHP Programmer Needed to..." than just "Programmer." You'll get fewer, but more qualified responses. If you don't know what languages are needed, either ask a friend or do a Google search beforehand, or you could post in the project that you don't know what language is needed, and ask them to make suggestions.

    Ideally, you will want to hire people who can educate you, so this sets the tone right from the beginning. I know some people who post $10 projects for 30 minutes of a programmer's time just to answer their questions and learn simple tips and tricks to quickly do yourself without having to hire someone.

  • Payment amount. First, decide if you want to pay them by the hour, or for the whole project. There are pros and cons to both. If you estimate that something will take 5-8 hours, going hourly is fine. For work that will take longer than that or that has a higher likelihood of uncertainty, I would try a project-basis.

    Sometimes you can't estimate how long something will take-in this case, hire them on an hourly basis for a little while to get started and figure things out. Sometimes applicants will claim that they can't estimate how long it will take, while others can. I would go with people who are able to give you specific information as it shows they have their act together and have done something enough times to know how long it should take.

    Often after working on something for a little while, the way ahead becomes much more clear and they can better estimate the remaining hours from there. Sometimes I will hire 2-3 people on an hourly basis to do parts of the same project, and compare their performance to decide who should finish the whole project themselves.

    Also, you may not have a clue what something will cost, so make your best guess and let the range of proposed prices confirm this assumption or bring you back to reality. It may surprise you by being higher or lower, on average, than you thought.

  • Payment terms. Do not pay more than 50% up front. Rather, you can pay up to 50% up front, but then have milestone payments.

    Also, never pay someone the final amount if there is still work left to be done...you may never see it finished if they take off to chase down new work.

  • Payment methods. Many of the sites listed above will handle the payment. If they don't, choose the one that feels most comfortable for you, or whichever the providers prefer most.


Upload samples of what you need

You can write 5 paragraphs trying to explain the final product, or you can show them something similar you have done before (or someone else's to model yours after).

Most sites will allow you to upload files to show them what they'll be working with or making. You can also insert links in the project description to files, audios, or videos showing or explaining things more vividly.

Choose the time period for bidding


You might be given options like 3 days, 5 days, 7 days, 15 days, or 30 days to accept bids. I would lean towards giving a longer time period, unless the urgency of your project means that you don't have as much time to wait.

But basically, the more time that providers have to find and respond to your project, the more qualified applicants you'll have to choose from.

Also, some of the best providers are also the busiest, so by giving a longer time frame to respond you are more likely to catch them when they're available.

This is not an exhaustive list, but covers the most important elements of a good project posting-one that will put you in a position of strength and cut down your odds of a bad experience. Cover these bases and you'll have more people applying than you can sort through.

Which then leads to the final phase: judging your applicants. In judging which applicant(s) to choose for your project, consider:

1) How they responded to your project request: were they articulate? Did their comments and/or questions make sense?

2) Their portfolio: do they have a website which shows their portfolio of work that you can judge? If so, take a close look.

3) Their ratings. On most of the outsourcing sites listed above, past clients will rate the outsourced person's work. I never use someone who hasn't completed at least 20 projects and has a rating of 4 stars or above.

Follow this advice and you can find the right outsourcers to help you grow your business and profits.

 

Suggested Resource: If you don't outsource, you can't compete. The math is simple...if your competitors are outsourcing and only pay $X to complete a task, and you pay $3X, $5X or $10X, your competitors will eat your lunch. You simply must outsource to stay competitive. Outsource the right way using Growthink's Outsourcing Formula. Learn more by clicking here.

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Opportunities in Smart Wearables [Webinar Invitation]


 

CCS Insights forecasts that 411 million smart wearable devices, worth a staggering $34 billion, will be sold in 2020 (up from 274 million this year).

These wearables include eyewear (97 million predicted to be sold in 2020), hearables (9 million est.), fitness and wellness wristbands (164 million), wearable cameras (25 million), tokens, clip-ons, jewelry, and smart garments (6 million), and smartwatches (110 million).

These devices and their associated technologies and software applications are already transforming industries as diverse as healthcare, telecommunications, entertainment, gaming, and more.

Webinar Invitation: Opportunities in Smart Wearables

You’re invited to listen to a webinar recording, hosted by Growthink co-Founder and Managing Partner Jay Turo, on Friday, September 16th at Noon ET / 9 am PT where a select group of wearable entrepreneurs and investors share how they and their companies are winning in this incredibly dynamic space.

My panelists will include:

  • Mr. David Park, Director of Digital Services at Hewlett-Packard Enterprise.  David is the Mobility Strategist for the U.S. Public Sector market for HP Enterprise Services. In his role, he is responsible for building for building and growing mobility in the U.S. Public Sector arena. He is actively accountable for driving strategic mobility initiatives while building key industry partner and relationships.  In his words, he focuses on the intersection of “Mobile + Digital + Apps + IoT + Wearables + UX + Cloud + Enterprise + Monetization + Government + Agile.”
  • Mr. Isy Goldwasser, CEO of thync. Thync is creating a new category of wearable products based on advanced neuroscience, Thync is dedicated to giving people access to the power of their minds. Based in Silicon Valley, the company has raised over $13 million in funding, including from Khosla Ventures.
  • Mr. David Mays, CEO of Walker Tracker. Walker Tracker provides best-in-class walking and activity challenges for corporations, organizations, municipalities, and schools. From Fortune 100 companies to mid-sized business, Walker Tracker powers engaging, socially oriented activity programs for both wireless and manual entry pedometers

On the web conference, our panelists will share:

  • Why the wearables market is growing so rapidly right now and where it will go from here
  • What is most important for a successful wearables customer experience - great hardware, software, the application itself, something else?
  • Who are the early consumer and business adopters in wearables and what is important to them?
  • Which specific companies / entrepreneurs are out there that smart investors should really be watching?
  • And much, much more!

Recording Link

Please listen to the webinar recording via the link below:  

https://attendee.gotowebinar.com/register/7474891639709337090

Look forward to your feedback.

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4 Emails That Get An Investor's Attention


 

If you were raising funding 25 years ago, you probably called prospective investors on the phone and sent them your business plan via fax or overnight delivery.

As you can imagine, things are very different today. And email is the number one way to communicate with prospective investors, particularly professional investors like venture capitalist.

The challenge, as you can imagine, is getting their attention. As most venture capitalists receive tons and tons of unsolicited email each day. So, the key is having a great subject line on your email to get them to open it.

Before giving you some subject lines that do work, let me tell you ones that don't. Subject lines such as "Unique Investment Opportunity," "Please Invest in our company," and "Great Investment Opportunity" don't catch investors' attention and turn them off.

So, don't use these. Here are some you can use:

1. Your Involvement in XYZ Company

Where XYZ company is a company that the investor has funded and which is in your general space. You would start the email with something such as "based on your investment in XYZ company, I think you will be interested in what we are doing..."

2. New in the "XYZ Space"


Where XYZ is the "space" in which you are operating in (e.g., the financial software space). The first line would tie the subject line to what you are doing.

3. Referred by XYZ


Where XYZ is a referral source that knows both you and the investor. This works extremely well, but clearly you must first get the referral.

Because referrals are so powerful, go on LinkedIn and/or other networks to see if you already have someone in your network that can refer you to the investor.

4. Comment on Your Post About XYZ


Where XYZ is a blog post that the investor recently wrote about a subject. In your opening line you explain what you agree with in their post and then tie it to your company.

Importantly, after your subject line and introductory line that ties your company with the subject line, you should NOT tell the investor everything about your company.

Rather, this first email should be a "teaser" email. A "teaser" email is an email that "teases" the investor by giving them a bite-sized amount of compelling information about your company.

The goal of the email is to see if they are interested. If they are, you will follow up with more information (maybe your Executive Summary and/or full business plan) with the goal of getting a face-to-face meeting with the investor.

There are two reasons you shouldn't send your business plan in your initial email. First, you don't want to "over-shop" your deal. Over-shopping is letting too many investors know about your company. If too many investors know about you, the law of numbers states that many investors will pass on investing in you (remember, most investors passed on the opportunity to invest in Google years ago).

So, if an investor isn't even interested in your market space or teaser email, they certainly won't invest in your company. And here's what can happen -- an interested investor asks this investor (the one who isn't interested in your space) if they've heard of your company. That investor says "yes" (since you unwittingly sent them your plan) and that they weren't interested. And then their disinterest dissuades the once interest investor from investing in you.

The second reason you don't want to send out your business plan in your initial email is for confidentiality reasons. You just don't want your business plan out there for everyone to see. Rather, wait until the investor shows that they are at least somewhat interested in your venture before sending it.

So, now that you know that you should start by sending investors a "teaser" email, the question is what to include in the teaser.

Here's the answer: the teaser email should include 5 to 6 bullets about your company and should be very short (200 words or less).  The goal, once again is simply to create a general interest in your venture so the investor commits time and energy to learning more about it (by requesting additional documents or setting up a meeting).

Your bullets should describe what space your company is in and credentials that make you uniquely qualified to succeed (e.g., credentials of management team, customers serving already or showing interest, etc.).


To summarize, send investors a teaser email instead of your business plan to start. And realizing that they receive hundreds of emails every day asking for funding, make sure your subject line stands out and seems like you're offering them value.

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The Most Important Time of Year Just Started...


 

[Click Here to listen to my September Webinar on the “7 Keys to Business Plan Success”]

Happy September! For many of us, this week is a turning of the page - from the slower, vacation and family-focused summer months - to the full-on business sprint to the end of the year.

In financial markets, the window between Labor Day and Thanksgiving is often referred to as "Capital-Raising Season," as it is a very active time for companies and investors to connect, to diligence each other, and to do deals.

I call it the "No Excuses" time of year.

Summer is over, the holidays are far away, tax season further, so now is the time to get deals done - growth financings, strategic partnerships, big new customer sales, key new hires you name it - if a mission critical deal is to be done, this is the time of year to do it.

You see, good deal makers get good deals done. Great dealmakers get great deals done fast.

So let’s all set a goal this fall to do twice the number of deals, in half the time, while maintaining and even improving quality. Here's how:

#5. Use the 20% Rule. In a previous post, I described The 20% Rule, whereby improving four key business processes by just 20% each leads to results doubling.

Simply identify four components of your deal-making process - for example 1) marketing-to-lead conversion 2) lead-to-proposal conversion 3) proposal-to-sale conversion and 4) repurchase rate, and then work to improve each by just 20%.

I run through the math here, with the net result of revenue increasing by 2.4X via these “cascading” 20% improvements.

#4. Build a One Month “Micro Plan.” While longer time horizons - 1, 3, 5 years - are powerful and necessary for more “global” business and strategic planning - for many mission critical projects shorter timeframes can be invigorating and catalytic.

For example, let’s look at how to raise capital in one month, a process that is not unusual to stretch out for six months, a year, or longer. To get it done in one month would require:

i. the business plan and all investor presentation materials to be completed in a week to ten days;
ii. a well vetted and relationship-based prospective investor assembled in parallel;
iii. contact with / promotion made to these investors within 7-10 days after completion of the plan; 
iv. detailed diligence provided and talked through with those showing interest within an additional 7-10 days; and, 
v. respectful yet urgency - driven “closing” done with the most interested prospective parties over just a few days.

Is this an “aspirational” timeline? Sure, but whether or not we actually get it done this fast the act of setting a timeline like this and then working like heck to meet it is in itself transformative.

And you just might surprise yourself and raise money far faster than you thought possible!

#3. Enlist Help. In modern business the old aphorism of “Many Hands Make Little Work” needs to be updated with the caveats that “Many Well Led Hands get High Quality, Important Work Done Fast.

It is so awesome that modern executives have with just a click of a button access to high quality, on-demand resources of all types: marketing copywriters, graphic and website designers, telemarketing sales help, contract fulfillment and customer service and the list goes on and on...

...for any business process there is quite likely an outsourced provider that can do it better, faster, and cheaper than in-house.

The key is having the know-how to source the right vendors and then leading them such that they seamlessly work together as to “de facto” become in their aggregate part of a full-time, in house team.

Hard to pull off? Well, if you feel this way, then hire an outsourced firm to manage the outsourcers!

This may seem like a Dilbertian Skit, but the reality is that the tools of virtual communication and collaboration are now so good that building a fully outsourced, on demand work model like this often makes far better business sense than the old “all under one roof” W-2 model.

#2. Work Harder. There are actually 168 hours in a week, not 40, and by working both longer hours ourselves along with orchestrating a global team per the above, we can get things done four times as fast as under the old "9 to 5" model.

I like to re-frame working longer hours as a blessing, as the vast majority of people just don't have the opportunity to work hard on challenging and remunerative projects like those of us in the Knowledge Economy.

And oh yeah, in addition to the “it is its own reward” nature of hard work, just plain old outworking the competition is the most tried and true strategy of winning deals in multiple bidder/vendor dynamics.

#1. Recognize that There are No Rules. There are no longer any rules whatsoever as to how long things should take.

Like Amazon making deliveries in 2 hours or less, Uber bringing a driver to your door in a few minutes, and Google giving us detailed answers to the most esoteric and niche questions in just a few milliseconds, the great technologists and innovators among us are constantly resetting the frame as to what fast is.

Let’s bring this “speed sensitivity” to our businesses these next two months.

Identify those areas where incremental (20%!) improvements can have a big cumulative effect, design “micro plans” to make those improvements, get help everywhere and anywhere, work hard, hard, hard, and let go of any pre-conceived notions as to how long things should take.

Do all this and we can rename this “No Excuses” season as the one of “Big Business Breakthroughs” for all of us!

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The 5 Most Common Funding Sources


 

If you want to be successful in business, it is crucial to determine when, where, and how to obtain the funds you need. Whether you need $1,000 or $1 million to start or expand your business, if you can't raise this money, you can't build the business you want.

Before You Look For Funding

Before you look for funding, you need to create your business plan. In addition to explaining your business and your strategy for success, your plan must determine how much money you need and for what it will be used.

Also, it's very important for you to understand the timing of the funding. For example, do you need all the funding now (e.g., to build out a location), or can you receive your funding in stages or "tranches."

The amount of funding you seek will effect the source of funding you approach. For example, if you require $250,000 in funding, angel investors are more applicable then venture capitalists. If you need $5 million, the opposite is true.

While I have identified 41 sources of funding for your business, below are the 5 most common.

The 5 Most Common Types of Funding

1. Funding from Personal Savings

 
Funding from personal savings is the most common type of funding for businesses. The two issues with this type of funding are 1) how much personal savings you have and 2) how much personal savings are you willing to risk.

In many cases, entrepreneurs and business owners prefer OPM, or "other people's money." The four funding sources below are all OPM sources.

2. Debt Financing

Debt financing is a fancy way of saying "loan." In debt financing, the lender (often a bank) gives you funding that you must repay over time with interest.

You must prove to the lender that the likelihood of you paying back the loan is high, and meet any requirements they have (e.g., having collateral in some cases).  With debt financing, you do not need to give up equity. However, once again, you will have to pay back the principal and interest.

3. Friends & Family

A big source of funding for entrepreneurs is friends and family. Friends and family members can provide funding in the form of debt (you must pay it back), equity (they get shares in your company), or even a hybrid (e.g., a royalty whereby they get paid back via a percentage of your sales).

Friends and family are a great source of funding since they generally trust you and are easier to convince than strangers. However, there is the risk of losing their money. And you must consider how your relationship with them might suffer if this happens.

4. Angel Investors

Angel Investors are individuals like friends and family members; you just don't know them (yet).  At present, there are about 250,000 private angel investors in the United States that fund more than 30,000 small businesses each year.

Most of these angel investors are not members of angel groups. Rather they are business owners, executives and/or other successful individuals that have the means and ability to fund deals that are presented to them and which they find interesting.

Networking is a great way to find these angel investors.

5. Venture Capitalists (VCs)


VC funding is a suitable option for businesses that are beyond the startup period, as well as those who need a larger amount of capital for expansion and increasing market share. Venture capitalists are usually more involved with business management, and they play a significant role in setting milestones, targets, and giving advice on how to ensure greater success.

Venture capitalists invest in companies and businesses they believe are likely to go public or be sold for a massive profit in the future. Specifically, they want to fund companies that have the ability to be valued at $100 million or more within five years. They also go through an expensive and lengthy process of deciding on the best business to invest their money. Hence, the approval process usually takes several months.

Bottom Line

As you search for the best funding source for your business, you will discover that some financing options are complicated while others may offer a very small amount.

Choosing an inappropriate type of funding can lead to unfavorable outcomes such as feuds between the lender and business owner, shift of control, waste of resources and other negative consequences.

With this in mind, you should study the benefits and drawbacks of each financing option and select the ideal one that will help you meet your business goals. Because with the right source(s) of money, the sky is the limit for your business.

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Learning from the High Flyers, Part Two


 

Last week, I wrote about how any business - no matter how "Old School" - can benefit via emulating the strategies of "High Flying" companies in industries like virtual reality, wearables, 3D printing, autonomous driving, and more.

One reader whose opinion I respect wrote back..."Jay, loved the post and agree with the sentiment, but can you make it a bit more actionable? Perhaps offer some specific “high flying” ideas and examples applicable right away to companies in slower growth industries and markets?"

Of course!

Here are four critical business domains - financing, sales, organization design and goal setting where the high-flyers get it right:

Financing. Most companies in high flying industries raise money (and a lot of it!) on an ongoing basis.

Like Uber raising $8.7 billion over 7 years.

Or Airbnb raising $2.3 billion over 8.

Or Dropbox raising $607 million over 9.

They keep raising money because money buys speed. Speed of product development, of brand-building, of customer acquisition, of team-building and talent aggregation.

Now, for how long will they continue to do it?

For as long as they are in business.

Quite simply, investor promotion is a mission-critical process that should be undertaken by every company of ambition on an ongoing and continuous basis.

For smaller, less "glamorous" companies, look at it this way - if you go out and ask for money, you might surprise yourself and raise it. And if you can't, it's a canary in the coal mine - flagging needing to be fixed problems with your strategic model, your management execution, or both.

Sales.  Over the past 15+ years, advising hundreds of companies across diverse industries, I have seen a consistent, disturbing trend: The older, more "established" a business is, the less enthusiastic, inspirational, and “Big Deal Effective” is its sales approach and execution.

Yes, any sales team for any business, no matter the industry, would instantly perform a LOT better by just emulating the "Messianic Enthusiasm" of the high flyers.

Well, you may say, if my business, my industry, my product was as exciting as theirs, then I would be more enthusiastic too!

Hogwash!

Enthusiasm, at its heart, is
a choice. Let's have our salespeople be as enthusiastic as those at the High Flyers and watch results improve right away.

Organization Design. When it comes to how that "Collection of Humans" that make up how a modern business is organized, long gone and never to return are the days of all a companies' people being W-2 employees working under a common roof.

Beyond a “virtual” workforce, beyond utilizing overseas development partners, best practices around modern organization design include "Scrum-like" reporting structures, all calls being done as video calls, always on chat, in-person meetings conducted standing up, no landline phones, "e-mail free" days of the week, and the complete elimination of office environments altogether.

Of course, not all of these approaches are appropriate for every business, but if your company is not growing then why not try everything and anything so that it does?

This is the high-flying mindset - to never be complacent or "me too," but instead to strive for efficiency and creativity in all aspects of how a company is led and managed.  

Goal Setting: High flying companies set big and exciting goals, design bold plans to reach them, and then organizationally work, work, work to make them so.

Compare this with the approach at too many older line businesses. They set goals like “growing 5% next year” or “hiring a new salesperson” or “redesigning the email newsletter.”

Please.
In the famous words of Daniel Burnham - “Make no little plans; they have no magic to stir men's blood.

Dream a little. Push the growth plan right to that edge of “Hot Air.”

My experience is that we are usually pleasantly surprised both by how close we come to reaching those “stretch” goals, and as importantly how much just going out on a limb a bit builds “elan” and confidence in the entrepreneur and the organization.

Financing, Sales, Organization Design, Planning.

Do like the high flyers in these business domains and soon enough your company will be one of them, too.

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Why Your Worst Enemy Can Raise More Money Than You


 

The word "crux" is an interesting word. It's a noun that can be defined as: (1) the decisive or most important point at issue, or (2) a particular point of difficulty.

In either case, the word aptly applies to raising funding for your business, because in doing so, most entrepreneurs and business owners encounter difficulties.

I believe the crux to successfully raising money for your business lies initially in understanding that investors are essentially professional risk managers.

Let me explain. Most sources of money, like banks and institutional equity investors (defined as institutions like venture capital firms, private equity firms and corporations that invest), are essentially professional risk managers. That is, they successfully invest or lend money by managing the risk that the money will be repaid or not.

So, your job as the entrepreneur seeking capital is to reduce your investor or lender's risk.

Let me give you a simple example. Let's say that both you and your worst enemy both wished to open a new restaurant.

In this scenario, which is the riskier investment?

  • You have put together a business plan for the new restaurant.

  • Your worst enemy has also put together a business plan for the restaurant...and he/she has also put together the menu, secured a deal for leasing space, received a detailed contract with a design/build firm, signed an employment agreement with the head chef, etc.


Clearly investing in your worst enemy is less risky, because they have already accomplished some of their "risk mitigating milestones."

Establishing Your Risk Mitigating Milestones


A "risk mitigating milestone" is an event that when completed, makes your company more likely to succeed. For example, for a restaurant, some of the "risk mitigating milestones" would include:

  • Finding the location
  • Getting the permits and licenses
  • Building out the restaurant
  • Hiring and training the staff
  • Opening the restaurant
  • Reaching $20,000 in monthly sales
  • Reaching $50,000 in monthly sales

 

As you can see, each time the restaurant achieves a milestone, the risk to the investor or lender decreases significantly. There are fewer things that can go wrong. And by the time the business reaches its last milestone, it has virtually no risk of failure.

Let me give you another example. For a new software company the risk mitigating milestones might be:

  • Designing a prototype
  • Getting successful beta testing results
  • Getting the product to a point where it is market-ready
  • Getting customers to purchase the product
  • Securing distribution partnerships
  • Reaching monthly revenue milestones


The key point when it comes to raising money is this: you generally do NOT raise ALL the money you need for your venture upfront. You merely raise enough money to achieve your initial milestones. Then, you raise
more money later to accomplish more milestones.

Yes, you are always raising money to get your company to the next level. Even Fortune 100 companies do this - they raise money by issuing more stock in order to launch new initiatives. It's an ongoing process-not something you do just once.

Creating Your Milestone Chart & Funding Requirements


The key is to first create your detailed risk mitigating milestone chart. Not only is this helpful for funding, but it will serve as a great "To Do" list for you and make sure you continue to achieve goals each day, week and month that progress your business.

Shoot for listing approximately six big milestones to achieve in the next year, five milestones to achieve next year, and so on for up to 5 years (so include two milestones to achieve in year 5). And alongside the milestones, include the time (expected completion date) and the amount of funding you will need to attain them.

After you create your milestone chart, you need to prioritize. Determine the milestones that you absolutely must accomplish with the initial funding. Ideally, these milestones will get you to point where you are generating revenues (if you are not already generating revenues). This is because the ability to generate revenues significantly reduces the risk of your venture; as it proves to lenders and investors that customers want what you are offering.

By setting up your milestones, you will figure out what you can accomplish for less money. And the fact is, the less money you need to raise, the easier it generally is to raise it (mainly because the easiest to raise money sources offer lower dollar amounts).

The other good news is that if you raise less money now, you will give up less equity and incur less debt, which will eventually lead to more dollars in your pocket.

Finally, when you eventually raise more money later (in a future funding round), because you have already achieved numerous milestones, you will raise it easier and secure better terms (e.g., higher valuation, lower interest rate, etc.).

It might surprise you what you can accomplish with less money! So write up your list of risk mitigating milestones and determine which must be done now and which can wait for later, focusing first on what is most likely to generate revenues.

 

Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.

 

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Learning from the Business High-Flyers


 

Earlier this month, I moderated a webinar panel focused on technology and entrepreneurial opportunities in Virtual Reality, a market sector growing at over 100% per year, and transforming industries as diverse as medicine, real estate, entertainment, gaming, and more.

Driven by five amazing panelists from the worlds of entertainment, software, healthcare, and venture capital, it was an inspirational and thought-provoking look at a market space brimming with opportunity, possibility, and bullishness.

It was also the first in a series that over the next few months I will be hosting featuring entrepreneurs and investors from some of the world’s hottest market and technology sectors, including 3D printing, drones, artificial intelligence, technology wearables, autonomous driving, and more.

I am doing this because first, it is simply exciting and inspiring to visit with innovators - folks who "connect the dots" between technological change and business opportunity.

And as an investor, I know that the only way to earn outsized profits is to identify businesses early, before they go through their "Hockey Stick" growth phase, and most of these kinds of companies are to be found in fast growth industries like those listed above.

But as importantly, I am hosting these webinars for those of us who do NOT work in high-flying sectors, but who can benefit tremendously from the type and quality of innovation thinking and strategic planning as done in them.

Thinking, planning, and doing that is fresher. More opportunities-filled and possibilities rich.

More easily embracing of new technologies, not just for their core customer value propositions, but also for internal business processes, team building, communication, collaboration, and more.

As I wrote in my Olympics Post last week, we must always be vigilant to maintain this "always innovating" mindset, especially as we and our businesses age and mature.

Unfortunately, too often the media and the world wants us to believe that breakout business success is only for the chosen few - for the young technologists, for the geographically advantaged. For startups.

But this just isn't true.

Breakout success is available to any business, no matter how young or old, no matter its industry or market, so long as its leaders have the guts and the competitive spirit to do whatever it takes to grow their companies.

And a huge part of doing whatever it takes is letting go of the conventional wisdom that so suffocates too many older businesses...

...and instead learning from and emulating innovators who are dreaming and doing big, breakout business things.

The best entrepreneurs and executives in high-flying sectors are exposed daily to the best and latest technologies, to the most creative business thinking and planning, and are infused with the most unlimited sense of business possibility and opportunity.

Let’s learn from and be inspired by them.

And let’s think, do, and dream big things in our businesses like them.

So in the months ahead keep a look out for your invitation to meet these awesome innovators.

And maybe, just maybe, a little of their growth magic will rub off on your business too.

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