The gates swing open and off go the horses. When you invest in a early-stage growth company, there are a lot of variables to consider, but at the end of the day, you want to make sure you have your dough on a well-trained thoroughbred. To help you do so, here are four amazing traits to look for before investing in a founder.
1. Owns Failures
People often avoid owning up to a mistake or failure, but if you’re about to saddle up your dollars with a company, make sure the founder is not one of these people. A good entrepreneur will never say “it’s my VP of Engineering’s fault.” Rather, they will take responsibility and truly learn the appropriate lesson and move forward.
2. Demonstrates a Sense of Fair Play
Scaling a business will put everyone involved in exciting, yet high-pressure situations, The most damaging thing a founder can do is to leave his own team hanging. The founder needs to step up to the plate as much if not more than the rest of his squad. It puts a very sour taste in the mouths of employees when they are asked to report at the office seven days a week with the founder nowhere in sight.
3. Has a Strong Sense of Economics
All good founders will have a strong sense of value exchange. When negotiating deal terms, a founder should ask what’s in it for me, and ask what’s in it for the other players. If the founder has a sense for win-win situations, you can almost be sure he/she has a shot to be competitive in the marketplace.
4. Not in Love With Their Idea
It sounds counterproductive on the surface, but markets and technology change all the time. What was great yesterday may no longer be great today. You want a founder who can keep an eye on changes and make the appropriate adjustments. So have doubts and challenge them each day.
As the old adage goes, you need money to make money. It’s not any different for entrepreneurs looking for venture financing. With that in mind, take a look at these four ways to reduce your cost of venture financing.
1. Test Your Gut-Feelings Before you Launch
This is not to say don’t trust your gut, but rather confirm or deny your gut. Many entrepreneurs make the mistake of diving into the market based on a series of good feelings. Those good feelings can take you in the wrong direction and cost you a lot of money. If you do nothing but trust your instinct, you run the risk of making poor decisions, which in turns results in poor financing.
2. Adjust After Launch
You can do all the testing you want, it’s never going to fully emulate reality. Without a doubt, the best way to get true feedback is to actually launch, but with the ability to adjust where necessary.
3. Understand the Industry
Especially in emerging industries no one really knows the rules to succeed. The key is to create opportunities for you and your business to be flexible. Let it be known that the ability to improvise may be the difference between business shut-down and business success. If a formula for success is known, imitate it and improve on it. Finally in an established market, find the strengths and weaknesses of your competitors and seek out unmet needs of the marketplace.
4. Learn What you Need to Know
Most VCs prefer you, the entrepreneur, to have a team. A team insures investors that all the necessary bits of knowledge are covered internally. The obvious catch to acquiring company allies is cost — and not just salary. Perhaps those extra bodies have a handsome stake in your company. But if you are well versed in every part of your business, you have an opportunity to win the trust of investors without much cost at all.
It’s not an easy game to play. Startup winners can elude even the brightest of minds, but if one does manage to uncover the next Uber or Pebble Watch, that discovery can lead to significant high-yield returns on their investments. Here are five things you need to know before you find your next growth capital home run.
1. Stay With What You Know, Take Calculated Risks
The best way to reduce risk is to understand what you are investing in. That understanding will be able to provide invaluable insight to the mechanics of the business and the investment itself. Make sure that the business has a scalable model so that it can grow to a level in which you will be able to get your money back as an investor. Long-time startup investor Kevin O’leary of Shark Tank says “I like to take risks. That’s how I make money. But they are calculated risks.” Take risks — without them, there’s no reward. But refrain from dumping dollars into something described as a sheer gamble.
2. Look For Founders Who Compliment You
By in large, a startup business is only as reliable of the people running the ship. Drill into the founders’ backgrounds and get a sense of the kind of people you are working with. What’s their educational background? Previous companies? What can they bring to the table as a person and a professional? At the end of the day, you need to be able to trust the people you are investing in. The road to wealth if often not forged alone and as such, a smart investor will not only look for partners who can compliment their knowledge and skill set, but also compensate for any weaknesses they may carry.
3. Join an Equity Crowdfunding Platform
If you are having a hard time finding a good investment prospect, a good fix is to join an equity crowdfunding platform. By doing this you will be able to navigate through different deals and different industries. Referring to the first point – It is important to learn about the market before making any type of investments.
4. Be Involved, Pay Attention
As an investor, you need to understand what, why, and how the startup intends to spend your money. This will give you a better sense when testing the founder’s vision. Also, review the salaries and see how much the founder intends to pay himself/herself. Understand if the money that the startup is raising would be enough to accomplish logical business checkpoints and milestones – this is a must. Furthermore, this due diligence will keep you, the investor, involved in every leg of the race. The more you pay attention, the more likely the startup grows, the faster you see returns on your investments. Yes, the capital is important, but don’t downplay the value of your action and advice.
5. Explore the Market For Acquisition Prospects
It’s impossible to see the future, but as an investor, you should do everything you can to try to do so. It’s crucially important to see what competition the startup has. As the investor, you need to know what the competitive advantage is (if any) over the marketplace. A competitive company could acquire the startup instead of mimicking their work, so investigating the hunger in the market could be beneficial. If there is competition, look at merger and acquisition history to understand what you and your money are up against. Knowing this will allow you to better plan for future funding and how you can be involved if you choose to be.
With the onerous increase in entrepreneurial spirit, it’s never been harder to earn attention in the growth capital playground. Getting up and putting on your best smile just won’t cut it anymore. While those things are important, there are a few extras you can do to get a couple more looks in your direction. Here are four things you need to know before your next business launch.
1. Write a Press Release
Press releases are a great tool to get your message across, and what’s more it’s completely free. Put together a well-written document that encapsulates your business, service/product and culture. Don’t bore readers with the mind-numbing details about technology or design, put something short and sweet together and send it out to as many relevant publications as you can.
2. Engage the Media
Once you gather media contacts, start reaching out to them immediately. Just like a sales pitch, be ready to sell yourself and your business to the publications. Why should they cover you? What makes you special? Have good answers to these questions.
3. Don’t Forget Email
Email is incredibly effective. If done right, an email campaign can be your most effective tool for engagement and conversions. Make a plan, make templates to follow — an introductory, a follow up and a welcome email. Though it might look inefficient on the surface, sending well thought-out emails can be the difference between success and failure in the growth capital world.
4. Create Multimedia Content
Don’t just blog, make all kinds of multimedia content. Shoot videos, design flyers to hand out at networking events. Make creative slideshows, etc.. Treat blogging as a support system to a much bigger content creation initiative.