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?
Lawyers always advise clients if you cannot win on “fact”, you must try to win on the “law”.
If you are an enterprise technology or “enabling” business, seeking growth capital fast, you may not “win” immediately in convincing the investor but there is no reason you cannot show investors why you are a “winner” in your ideal customer’s eyes. We are talking about “leverage”, and applying tremendous “normative or peer pressure” to the investor’s thinking. The more impressive the customers (BMW), and the scale of the future opportunities (global markets), the more power you have to exert.
Customer Opportunity Assessment (“COA”):
Grid A: How much will the opportunity cost to implement (set up, training, operation, licence fees, lease space, new hires, new expertise) vs. How much potential benefit does the opportunity provide (tangible improvements for customers, new products or services offered, self-financing or not, is the risk worth the benefit, how long until we see expected results and so on)?
Grid B: How difficult is it to implement your technology (customer understanding, reliability, dependence on support staff, physical space, users’ connectivity ease and experience etc) vs. How close is the improvement to your ideal customer’s current corporate strategy (building a stronger brand, faster innovation, stronger business model, current systems, procedures and methods, faster new customer acquisition, quicker new product/services offered etc.)
You are ideally seeking to be positioned as “low” implementation cost/”high” potential benefit on Grid A, and “low” difficulty in implementing/”high” proximity to your ideal customers’ strategy, on Grid B.
If your attitude is the investor must find this out for themselves or you are wary of asking your own customers, you are dramatically reducing the odds of a prospective investor partnership and committed capital.
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.
If you insist on providing others with an opaque image of your ideal investor for your business proposition, you are either not willing to put in the hard work or you are needing a miracle to attract their attention. Which is it?
If you are an entrepreneur with a highly ambiguous and complex startup, why would you take two weeks to pick up the phone to a high potential lead referred by one of your investors, cancel proposed call times and disappear? Oh, it’s the “madness of the startup world”! No, it isn’t. It is an entrepreneur, who lacks the routine and exceptional discipline to succeed, and is simply interested in “taking” investor’s money.
Here is the rub, the worst offenders are not the wunderkids. They are the former corporate executives, bankers and strategy consultants, whose mindset and behaviour is “trapped” in their past occupation.
Critical evaluation starts with our own actual behaviour, not what we tell others or think is happening.
How many alternative asset managers can you demonstrably say are well run businesses? I am talking about organisations that work smartly not hard, their employees have time to pursue their passions, and they reinvent themselves time and time again. The honest to god truth is that most of these small and mid-sized businesses would fail their own criteria of investable businesses when unmasked. That begs the question, if you are a superior entrepreneur why would you want to answer to a “new boss”, who is ill disciplined, disorganised and dysfunctional? To think that you can draw a distinction between their money and how they manage themselves, is naive at the extreme.
If you are an entrepreneur with the courage, talent and discipline to take all the risk to create, build and exploit your own business, why would you want to support other people’s lifestyles?
Investors don’t fear an entrepreneur and their organisation’s ideal future, what they do fear is that the road to that destination is not littered with explosive devices. What preventative and contingent actions do you have in place now to allay your ideal investors’ fear that they are not lambs to the slaughter? Your success in powerfully articulating and boldly reassuring them is directly correlated to the time taken to convert initial interest into a firm commitment.
How accurate do you find fellow investors, clients, business partners and so forth in offering attractive opportunities (risk and reward) for your business growth? My presumption here is that they are genuine in seeking your serious commitment and offering meaningful reciprocal value.
If your response is “moderate” or “low”, it might just be that you have done a poor job at continually educating them about how your business works, and what is immediately useful and relevant, right now.
Not that they are “cheap”, or in someway, damaged, which I find a lot of people conclude wrongly.
In the current public spat between the activist investor, Voce Capital Management, the Board and Mark Watson, CEO of publicly-listed Bermudan insurer, Argo Group, the spendthrift allegations include the co-mingling of personal and business interests. One in particular was the “vanity sponsorship” of a Formula E racing team, a Volvo ocean race team, and an Americas Cup Team. A mismatch between Argo’s ideal buyers of its’ products and services, those sports, and the “return” for Argo’s stockholders.
Let me reverse this question, name me a corporate sponsorship of a sport or cultural event by a publicly listed firm that didn’t originally commence with a CEO or powerful figure, who had a strong personal or emotional connection?
That doesn’t make wasting stockholders money right but I could list endless sponsorships, past and present, JLT and Aon with Newbury Racecourse, RSA Group with Cricket Ireland, Hilton with McLaren Formula 1, Deutsche Bank with the HK Art Fair. It is a very “grey area”, where the Heads of Sponsorship and Marketing can “dress” up the return on investment to positively impact their key constituents because there are very few people with real skin in the game or accountability.
