Don’t Just Show Me The Money…
Show me how to find it!
I’m going to start this off with a harsh truth: no matter how excited you are about your business plan and pitch deck, securing outside investment for your business ultimately comes down to the pure numbers. After leaving the Show Me the Money Workshop last week in our MTO EDU mastermind program, I had a lot to think about. Let me quickly tell you a bit about the top insights that I gathered from our guest speaker, Alex Palmer, and our agency’s CEO and founder, Gretchen Fox (both of which, have a wealth of knowledge when it comes to preparing (and getting) investment from VC’s, Angels, and Crowdfunding sources. Alex is currently a Venture Catalyst at SOREDI in Southern Oregon, helping entrepreneurs and local investors connect, prepare for funding rounds, and ultimately, bring deal-flow into the region for sustained economic growth. Gretchen, on the other hand, is currently the CEO of MTO Agency and has been a key player in multiple fundraising rounds in the past decade. Their knowledge is vast and deep, hence my note-taking. So let’s jump into what I learned!
First off, let’s go over the types of fundraising options that are available, and which might be the best fit for you and your business. Obviously, there are tons of options when it comes to looking for money, but where should you even begin to look? To some of our MTO EDU members, this question has been super daunting! Alex shared that financing your endeavors with a bank loan or credit line should almost always be the first step, as long as you and your team can support the repayment plan involved. He made an important point: Make sure you know how much debt you can reasonably take on. A late or missed credit card payment is the last thing you want when trying to launch your dream biz! Another important step: raising a friends and family round. Call your friends and colleagues, call your second-cousins you still get Christmas cards from – showing people you know believe in you and are willing to part with their cold hard cash is an important ‘signal’ to investors (and banks). If you’ve exhausted these resources (or relationships) already, then it’s time to move to the bigger and more conventional options: Angel’s and Venture Capitalists. Now, keep this in mind, an investor in this realm is likely looking for a 5-10X return on investment in ~5 years.
Now that we have identified some of our options, let’s talk about what we can do to establish credibility and connect with the investor at hand. If you haven’t heard of the term “traction,” it’s time to get real familiar with it. Traction “refers to the progress of a start-up company and the momentum it gains as the business grows… It applies to nearly any kind of business, whether service or product-oriented, or whether it sells to the public, other businesses or the government sector.” (Casey Anderson, Chron, What is Business Traction? 11/08/18) Investors are looking for a business that is showing traction along with enthusiasm, verticle expertise, and commitment. The best ways to show traction to an Investor is to have already completed friends and family funding round, have documented sales (or pre-sales), email registrations, and measurable growth. (Note: one of our attendees asked if a failed crowd-funding campaign is a red flag? The answer: Don’t worry! As long as you can show what you learned from the experience and what things to do the next time differently, you can overcome this!)
While we’re on the topic of red flags, let’s dive into what investors do and don’t want to see in your pitch deck. The main things to avoid are actually pretty straight forward.
- Investor’s don’t want to be sold too hard, so instead of bringing a polished proposal written in platinum, focus more on showing the value of the investment to the investor.
- Be confident but humble. This approach is real, raw, and will allow you to connect with the investor on a much more personal level.
- Gretchen Fox said “If you and your team are preparing for a funding round, make sure to not overcomplicate the pitch. Too many details can distract from your pitch. Check out my go-to pitch template created by Guy Kawasaki here.”
- Lack of traction is a huge red flag for an investor, so be prepared to show your KPI’s and other useful growth metrics during your pitch. Remember, at the end of the day, investors are investing in businesses to make a return. If the ROI opportunity they’re looking for isn’t there, the deal won’t work.
- Know what you need. Clear communication is key. Make sure that the investor and your team are ultra aligned from day one.
- Know your exit strategy. A quick tip from Alex: “Starting at the beginning of your relationship with a prospective investor or firm, make sure an exit strategy is established. This would likely look like selling either a share or your entire company to free up enough cash flow to pay the investor back.”
- When you’re starting to look for outside funding for your business and have gotten all the wheels turning, remember this: investors, invest in people, not businesses. Don’t be fooled with the gold-lined investment firms or big family names, the human connection will always come first. Aim to find the right investor who believes in YOU.
With all of that said, do you think your business is ready to seek outside funding? This is a big question but being clear early on will save you and your entire team a ton of energy and time. We know energy is not something you can spare to lose when you’re launching or running a successful business.
Hungry to hear more? MTO EDU members can access the full taping of our Show Me the Money Workshop plus 47 hours of digital marketing and social media training. Enroll today and get a custom syllabus to grow your business with our agency team’s support, step by step!