Posts Tagged ‘timing’

It Is Really Not About You

Friday, November 10th, 2017

 

Why do so many seasoned, and less seasoned entrepreneurs seeking to attract new investment shoot themselves in the foot? They are rarely short of industry knowledge but they are woefully lacking the process skills and critical thinking to attract serious investors. Acquiring investment is about investors. An investor validating their own judgement, no one else’s.

Yet all I here at the outset, is how great the entrepreneur’s business skills and judgement are, wrapped up in their business model and growth plans.

When I push back and ask, “what” (strategy) have/are you doing to help your ideal investor validate their own skills and judgement after they are done with your investment? I am invariably met by a blank stare. That is compounded by my supplemental question, “how” (tactics) have/are you planning to help your ideal investor validate their own skills and judgement when they are done with your investment?

In the absence of a strategy and tactics for creating powerful, sustainable and profitable partnerships with  investors, an entrepreneur’s mission will never be met and manifest. Here is three powerful lessons from my most successful clients:

  1. Raising, deploying and realising capital is a “process”, not a small number of events. It has a “before” (trust, relationship building, conceptual agreement culminating in agreed terms), “during” (effective implementation, impressive value creation, robust risk mitigation) and “after” (planned disengagement, rapid realisation of committed capital plus impressive gains, efficient remittance of resources). Or to put it crudely, cash and resources “in”, cash and resources “out” / time period.
  2. Timing has a “hierarchy of priorities”. (1) the investor’s financial, intellectual, social and cultural needs (most only think about the first need and rarely consider how those are changing in the lifetime of the investment), (2) the availability of an appropriate exit to ensure the investor’s objectives are met and (3) the  future of the business.
  3. They think and act like a successful investor. An investor thinks with logic but acts on emotion, although in some cases the latter might be as heard to discern as Robert Shaw’s face in that infamous card game on the smoke-filled train carriage to Chicago, in my personal favourite, The Sting.

Uncovering The Investor’s Logic and Emotional Reasoning

  1. The reward logic behind the deal. How might it meet or exceed the investor’s need for capital preservation and capital gain, the return on the investor’s intellectual time invested, the social impact met and the cultural benefits accrued (for example, greater affinity with like-minded investors)?
  2. The risk logic behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding their desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  3. The sum of the above is the investor’s “great deal” logically. We are not finished yet!
  4. The emotional rewards behind the deal. How might the emotional imperatives of the investor (“reward”) be transformed (repute, peer recognition, trusting relationship with the General Partners and co-investors, promotion prospects, larger bonus and share of carried interest, ego, greater responsibilities, career development, future capital made available, new fund created, more impressive future dealflow presented and so on)?
  5. The emotional risks behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding those desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  6. The sum of the above is the investor’s “great deal” emotionally. That is what they are going to make their final decision based on. Are you investing sufficient time and energy in the right area? Are you thinking it through smartly? My guess is most entrepreneurs are spending 90% of their time on the logical reasoning and perhaps 10% on the emotional reasoning when it probably needs to be inverse. Why would you do that?

The smart readers will quickly grasp that a PowerPoint deck or teaser is largely worthless at addressing the latter. You need absolute credibility. You need to take time to build a peer-level trusting relationship. You need to ask powerful questions in a way that the investor is willing to reveal his or her priorities. The shorter the question, the more the investor will reveal. It crystallises it for them. “What are your hopes? Why? What are you fearful of? How did you get to your position?” Frame the question, listen and follow up in a smart way. You cannot coerce or motivate them.

Your job, as an entrepreneur, is to aggregate and connect the dots for the investor. To convert, the credibility and seductive rapport into committed capital with the use of powerful language and a compelling interface for the  investor.

After reading this you may very well panic and spot a yawning gap in your skills and techniques. That is OK, find an entrepreneur, who has done what you successfully seek to do and who can translate and transfer it to you.

A word of warning, a great many advisers don’t qualify, nor do a great many entrepreneurs, who are inept at the translation and transference. Hire qualified advice sparingly.

© James Berkeley 2017. All Rights Reserved.

 

When Your Time Has Come

Monday, August 11th, 2014

Timing is key to success for executives and entrepreneurs. Yet most of us rarely chance upon the “perfect” time. We tend to think in business of two dimensions: “market readiness” for your product and service and “business readiness” for the increasing “market need”.  Yet we largely overlook the third dimension, “personal readiness” in the corporate world. When we do think about the latter, we tend to think in negative tones. We keep score and loudly chastise our self and our colleagues for our failures (“we weren’t ready”, “the timing was all wrong in hindsight”, “we should have seen the obstacles”). Overlooking largely those things that we omitted to do (failed to make a speedy decision, relied on a phone call rather than a personal visit with the prospect, spoke to the wrong people, applied ineffective due diligence and so on). For example, I was listening to a radio reporter berating Tiger Woods for returning too early on the PGA Tour from a chronic back injury last night, and stating that his urge to return too soon “stinks” for his fans and the general media, who want to see a genuine rivalry with Rory McIlroy. The inference being that his “ego” and his goal of chasing down Jack Nicklaus’s majors record was overriding common sense. Another reporter posed the question, when have you ever heard someone say they came back too late, in professional sports.The real answer, of course, is no one ever knows the right time, it is largely a matter of art and science. Not even the “after-timers” (commentators, pub bores and so on), who have never been successful themselves.  

The “art”, I am referring to, is the self-confidence in your talent and performance and the “science” is your consistent physical and mental ability to hit the required shot with the right level of precision.   The same applies in business, whether it is your “personal readiness” to accept the promotion, successfully compete for larger clients, to enter new markets or to attract smarter people to your business.  My observation is that what separates the “best” from the “ordinary” or the “lousy”, is largely those people who consistently show good judgement (balancing risk and reward) and the application of common sense (removing the emotion from the logical decision-making process). Unless the risks are catastrophic for you personally and for your business, if you are 80% sure or more that it is the right call, make the investment, accept the opportunity or enter the chosen market. Then run like mad. Racehorses after all are taught in pre-training to mentally ready themselves for race day, and when the starting gate flies open, they surge forward. Why cannot we teach ourselves in business to do the same, once we have committed to go ahead? After all, what ACTUALLY is the worse that can happen? You will be surprised by how little, not how large, the consequences are on your future personal and professional prospects in most cases. 

© James Berkeley 2014. All Reserved.