Much like going to the grocery store and sifting through a mountain apples to find one without blemishes, identifying the perfect-looking company to invest in takes a good eye. To make your eyes a little sharper, take a look at these four ways to identify the perfect early-stage growth company investment…
1. Exit Strategy
Does a startup have a clear exit strategy in place? It’s important that you as an investor know how you are going to make your money back and at what timeline. Without a clear direction or plan to generate returns for you, the investor, there’s little reason to dive into the opportunity.
2. Clear Ownership
As an investor you must have a complete understanding of who owns the business and all of its intellectual properties. If there is any doubts regarding patents, copyright, or ownership of assets, your investment should be withheld until those issues are legally taken care of.
Some early-stage growth companies can make a splash early, but disappear in just a few short years or even months. Conceivably, this could still prove to be a solid investment – if there is a swift exit strategy in place. But ideally a company should be able to demonstrate that it can play the long game.
Founders must be willing to work with investors and be available virtually at all times. A company may look great on paper, but any working or financial relationship which could become destructive or stressful may not be worth investing in at all. There must be a mutual respect between founders and investors, each knowing their place in the company.
While it’s no secret that there are a lot of hungry entrepreneurs out there trying to get their hands on growth capital, there are a few simple ways you can separate yourself from the pack. Before you launch your next financing campaign, be mindful of these four steps to getting your early-stage growth company fully funded.
1. Start Months in Advance
Give yourself plenty of time to plan the campaign, create top-notch content and coordinate the launch date. The growth leading up to the campaign can be argued to be more important as the growth during the campaign itself.
2. Understand the Customer/Investor
Do your best to narrow your market down to as small as you possibly can. Envision your ideal financing partner and try to find people or organizations that fit that image. If possible, send out testers before pressing the start button on your financing campaign. Early tester feedback should be a big decider on your strategy ahead.
3. Offer a Lifetime Perk
Offer your potential backers a lifetime perk. Maybe it’s free membership for life, or a lifetime supply of a particular product. It doesn’t have to be big, but these perks can go a long way in closing deals that are otherwise sitting on the fence.
4. Focus On Your Goal
Write out and plan your entire financing campaign before you start anything else. Be organized and be ready for adjustments when necessary. Set your goals and don’t lose focus.
Culture is a bit of a buzzword in the business world these days, and for good reason. There’s no surprise in the success of businesses like Virgin and Nordstrom — corporate culture is a humongous focus in the boardroom. Before you invest and partner with a company leader, take a look at these three keys to identifying good corporate culture.
What is the “why” behind the “what” in the business? Having a purpose constitutes vision, and having a vision enables passion. Before you invest in the next Mark Zuckerberg, make sure he or she has these not always inherent qualities. This kind of attitude often has a trickle down effect — before the troops can be motivated, they must be led properly by their general.
More than ever, the ability to turn on a dime is crucial. Twitter once was a destination to find and subscribe to podcasts, Starbucks once exclusively sold espresso machines and coffee beans. Nokia made its earliest cash by churning out paper, Flickr was nothing more than a role playing game. At some point, these company heads decided it was time for a change. Be sure your partner CEO is open for a pivot if necessary.
3. Empowered Employees
Richard Branson once said “Take care of your employees, they’ll look after your customers. It’s that simple.” Finding that impeccable customer service is simply found by giving employees authority and responsibility. As Nordstrom’s employee handbook famously reads “Our One Rule: Use good judgment in all situations…” This kind of treatment breeds loyalty, which in turn lowers staff turnover.
It doesn’t have to be difficult to get through to an investor. If your company is good, it will be seen. If your product is good, it will be tested. But as every investor knows, their decision to fork out the dough hinges on the competence and knowledge of the company owner at hand. Here are three ways to successfully raise capital for your early-stage growth company.
1. Make Sure Your Business Plans and Marketing are Solid
This is probably the most important point of all. To have a clear and concise business and marketing plan means you understand the exact nature of your business and what it’s trying to achieve. If you know this, the investor can too. Have a solid plan about your leadership dynamic and how you plan to scale it. These are crucial points that investors will sink their teeth into.
2. Know Everything About Your Industry
Know your industry with all of its nuances. Simply put, investors do not have the time or patience to put in this kind of leg work for you – the more you know, the better. If you are able to show investors that you know more than your competitors, that will surely go a long way in the decision making. It’s amazing what a little research can do. Delve into the history of your industry and look for patterns of success and failure.
3. Perfect the Pitch
Honesty is the best policy. It’s cliché, but it’s the truth in this case. Many deals have fallen through after due-diligence. When you pitch, be sure to cover the who, what, when, where, why and how. It’s an easy exercise to execute on paper, but do your best to have it flow nicely when speaking. There will be questions, so be ready. Again, know as much as you can about your competitors.