For every 10 entrepreneurs or executives, who use the refrain “we are gaining great traction with [investors, buyers, customers]”, I find 9 have nothing meaningful to show for it yet [committed capital, signed agreements, cash in the bank]. Fact.
Let’s be clear, you cannot feed the family on popularity or acceptances of your idea, product or investment. It reminds me of the silly game social media influencers play in justifying their success by the number of “likes”.
To then use that as an excuse, as some do to withhold investment in improving their own skills in attracting and converting potential investors into actual investors, leads into buyers, and interest into cash is dumb. What are you “saving up for”, when your skills deficiency is such that you need to be spending now? Longer suffering?
I have had a 40 year fascination with the sport of horse racing, and spent time with some of the very rare individuals, who have sustained a successful career as a professional gambler. Their betting strategies have constantly evolved over the years, as their “edge” has waned but if you look at their best success, it is come in sports or disciplines that play to their “character”.
The thought crossed my mind with a couple of hedge fund and private equity managers recently. Hard-nosed financial minds with a powerful track record and reputation for finding and turning around distressed businesses. Perhaps due to their own hubris, brand power or the quantum of dry powder needing a home, they have jumped into growth equity investing. The nuanced art of buying a superior business and attracting other superior entrepreneurs to join the party (“buy and build” strategy) while instilling operational and financial discipline. Yet their character traits are highly controlling and intense, their social skills and ability to create a seductive rapport with entrepreneurs is largely non-existent despite their high intellect. Imagine the Oxford or Yale professor running for public office in a blue collar constituency.
That they have arrived at first base, made the initial “platform” acquisition, is no sign of future success. Merely a group of people, who have bought into an investment “concept” but lack the real world skills and volition to build a meaningful platform.
In theory, I have the passion, size and stature to be a jockey but I wouldn’t bet on myself to have the courage to race upside other thoroughbreds at 30 MPH, why would an investor assume their character would allow them to succeed in every investment discipline?
Here in London, the month of June is arguably the best time for international tourists to visit the city. What with the pageantry of The Trooping of the Colour, Royal Ascot, Henley Regatta, Wimbledon, and major music acts in town, it is a sporting and social mecca. However, unseasonal rain and cool temperatures, as visitors are experiencing this week is an occupational hazard. It necessitates everyone has a plan B and C for what to see and do, and what to wear.
The same is true for an entrepreneur having prepared their business for sale, selected a preferred bidder and negotiated the terms of a deal. Here is three common situations:
Misunderstandings arise when a whole new group of advisers – lawyers, accountants, bankers and other financial advisers – arrive, when they’ve not been privy to the negotiations or to the nuances of the conceptual agreement reached.
Highly important issues arise in the due diligence process.
There is a deterioration in the financial performance of the business.
What is your “wet weather” option?
You need a mixture of preventative and contingent actions.
“Preventative“, in the form, of a growing peer level trusting relationship and intimate dialogue with what I term, the “economic purchaser”. The individual with the means and authority to approve the purchase, whose P&L will pay you for the business, who has the veto right or will claim credit for the acquisition or investment. Where you can ask the economic purchaser to intervene where his or her lawyers are hung up on moderate or low importance issues and threatening to delay or derail your agreement.
“Contingent“, in the form of
a willingness to end the discussions with the purchaser if your objectives are not being met.
you can quickly attract alternative ideal bidders (personal/emotional connection to you and/or the business, have a need or one that can be easily rekindled for the investment, can move fast and possesses means and authority to pull the trigger).
ceasing the entire sale process.
Experienced sellers know there are no guarantees, just as those tourists splashing through the rain towards the Tower of London and the London Eye must accept this week.
On behalf of my global private investor group, I get asked for my opinion about all manner of new and existing, mature and immature, growth businesses. Time is the scarcity, not money. Here is six reasons for “instant dismissal”:
Opaque and unimpressive value for the customer
Ideal buyers of the product/service/relationship (name, title, organisation, sub-sector, market need) unclear
Intellectual firepower to attract and retain those ideal buyers weak or not clear
Intelligent pricing not self-evident
Reinvestment plan in innovation (people, markets, technology, systems and so forth) unclear or non-existent
Not a seasoned entrepreneur, who has accomplished this exact success before, or not taking advice from one.
You are talking about funding terms and conditions before you have framed the investor’s objectives
The investor continues to ask questions about your credibility long after your first conversation.
The investor feigns interest with anecdotes of his or her own past experiences and seeks to point you to a “dead-end” road.
The investor routinely allows (or makes arranged) disruptions to your meeting, by their assistant, colleagues or to take “urgent” phone calls.
The investor cuts short your meeting or arranges for a subordinate to step in at short notice.
You are pushed into a position by the investor of constantly defending your investment thesis, your IP, or your technology rather than discussing how you might work as partners in success.
You are doing more than a third of the talking.
You are treated as a subordinate in the investor meeting (body language and talk).
The investor refuses to engage in a conversation about his or her desired outcomes as it pertains to your investment needs. (“It is too early.”)
The responses that you receive from the investor are curt and to the point but with little or no explanation for his or her position.
You leave accepting “we’ll call get to you” or words to that effect from the investor that include no definitive next step (call, meeting, exchange of further information).
Your follow up calls and other attempts at contact are returned with a cursory platitude or not at all.
Speed and brevity are the fast track to wisdom. Yet a lot of entrepreneurs don’t think about that until they are done speaking to investors. They dive into telling stories, writing business plans, presenting facts and defending their position, with excessive amounts of background information, as if that bolsters their credibility and investment potential. It doesn’t, it merely shows they have a lot of factual data, nothing more. It doesn’t move the investor an inch closer to better understanding what the investor experience is going to be like and the entrepreneur’s ability to positively influence it while mitigating risk.
Repeat after me before walking into your next investor meeting: “I am not doing a university research study or requesting parole. I am having a conversation with a peer (investor). I am there to build a trusting relationship and the investor is seeking to reach conceptual agreement with me, such that both of us can see a wild attractive opportunity staring us in the face.”
Keep it simple. Slash the background information, please.
In my business transition advisory work, I find 80% of entrepreneurs and executives in high-growth and mid-sized businesses very clear about the preferred outcome for the business, 50% very clear about the simplest path to it, 20% very clear about their own ideal future post-transition and less than 10% very clear on the optimum way to get “there”. Why? They’ve consciously or unconsciously ceded power and control to others, not prioritised themselves, or worse, they are in hiding behind a veil of procrastination. Have I hit on a very uncomfortable truth?
Pull up a chair, eliminate the distractions and let’s resolve now to clearly, and unambiguously, answer the three most important questions:
What am I tremendously passionate about?
What rare and powerful combination of skills, behaviours and expertise do I uniquely possess or could quickly develop?
Where would the application of those talents have a transformational impact on the future of (enter organisation name), and its’ key constituents (enter clients, employees, investors, board members, business partners, suppliers names and so on)?
Armed with that level of clarity, what stops you setting aside time now in your diary to meet with those individuals? For many of my clients, it is really one of three reasons: you don’t trust your own judgement (“I am unfamiliar who’d have a need for me outside what I know”), you don’t see a need (“opportunities will come to me”), or you don’t see the urgency to do it (“I’ll get around to it once my immediate business goals are met”). Some site money as an excuse but that is very rarely the case unless you are broke.
The harsh truth is without the discipline, hard work and talent, to make it happen now, it will rarely lead to a desirable personal conclusion. You’ll end up forever circling half-explored opportunities, amid growing frustration of wanting to get “stuck into something”. When you do have the need post-transition, finding the “right opportunity” is incredibly difficult (your ideal relationships and interactions have changed markedly). Finally, you find perhaps for the first time, in the case of entrepreneurs, founders and executives on “exit”, you are beholden to others’ timing and priorities, which don’t align with your own.
Hiring qualified experts like me (depth and breadth of insight globally supported by a track record of success) can demonstrably help, strategically, where you are seeking validation of your own judgement, and tactically, pathways to ideal names, monthly accountability or creation of a post-transition structure “in waiting”. For example, the entrepreneur, who decides that he wants to invest in other entrepreneurs or the executive, who wants to work with private investors or philanthropic initiatives. However, it is really down to you and your desire to mitigate the risks of an unsatisfactory outcome.
I meet a great many entrepreneurs, who readily talk about the fears that grip their clients but a small minority, who will voluntarily talk about their own fears and the consequences. It is “as if” vulnerability = failure or weakness. When in fact it is the polar opposite.
The reluctance to talk has a spiralling effect on individuals’ health and wellbeing, where stress is overlaid by more stress. That is why very few entrepreneurs succeed long-term without a strong support system. People, who are ideally placed to listen and offer qualified feedback. To be blunt, to be honest and to be supportive. Who those individuals are only the entrepreneur can ultimately determine.
Who get’s my time and interest? Two exploratory conversations with contrasting entrepreneurs with high-growth businesses this week.
Entrepreneur A: “Let me show you my powerpoint presentation.” Five minutes later in response to what are you seeking to accomplish and where might I be immediately helpful, “I am just looking for money, I don’t need anything else.”
Entrepreneur B: “Let me tell you where I am at with my business, where I’d ideally like to be in future and what I am needing to change including raising new money.” After ten minutes of discourse and accepted vulnerability, “I’d be interested in your advice for me.”
As investors we want confident, not humble entrepreneurs. We want entrepreneurs with high levels of self-worth and a willingness to be vulnerable. To voluntarily admit weakness and display smart judgement.
We don’t want defensive entrepreneurs or those, who seek to excessively control our view into their business. Entrepreneurs don’t have to be transparent, translucent will do fine. When your use of powerful language, social skills, and intellect is obscured from us, little wonder investors move on.
Here is my observation: have you adapted your behaviour to the life you now lead (entrepreneur), or insist on behaving as you learned to do in a former life as a former Citi banker, BCG consultant or CEO of a global company? 85% of the first-time entrepreneurs I meet persist in behaving as they have in their prior life with one obvious exception. Money. They happily claim poverty “I am not in the position I was….” at the mere mention of paying for advice. When the reality is they remain in the top 2% of the nation’s wealthiest people. It is simply not credible.
