You’ve finally found that investor interested in helping your company raise growth capital. Now you need to get the exact deals and terms that you’re looking for. Strong negotiation skills are needed in every business venture and it is important to be able to compromise on the terms so that both parties are happy with the deal. Negotiation skills are acquired through time and practice. Here are five tips that will help you get started.
1. Give and Take
Make sure you know how to compromise. Both sides need to have certain needs met.
2. Be Willing to Walk Away
Go with your gut. Sometimes the deal will not go through – and that’s okay. If it’s meant to be, it’ll happen, and sometimes you may need to go through multiple deals in order to get what you need and want.
3. Don’t Rush
Don’t ever rush when trying to complete a business deal. By rushing you may miss important details in contracts, or you may miss out on a better deal. That being said, sometimes waiting too long isn’t helpful either. Make sure to find the right balance.
4. Do Your Homework
Do all the research you possibly can on the investor(s) that are interested in your opportunity. Going into a business venture completely blind is never a good idea. Doing the proper research will eliminated future problems.
Make sure to listen to the other party. This is especially important in making sure that the deal you come to terms with is fair for both sides.
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.
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.
This is the time to be an entrepreneur. Never has it been easier to register a business, engage the public and perhaps most importantly – raise money. Thanks to the (rather sudden) rise of the FinTech marketplace, thousands of entrepreneurs are able to participate in a streamlined lending process that’s no longer bogged down by tedious paperwork and idle time. Here are three FinTech Developments that will continue to benefit borrowers in the long run.
1. ALL Generations Are Now Embracing and Relying on Mobile Tech
From checking weather reports to doing some last-minute holiday shopping, we are using our mobile devices for virtually everything. Thanks to FinTech, we can now lend and borrow just as conveniently. The nine-to-five banking and financing days are all but completely minimized. Most early-stage growth companies are strapped for time, but their need for financing is arguably greater today than it ever has been before. Businesses are looking to skip the chit-chat and use their time more efficiently – especially Millennials.
2. Despite Looming Interest Rate Hikes Ahead, Entrepreneurs Will Still Seek Capital
Entrepreneurship is not going anywhere. Furthermore, higher interest rates make it more profitable for conservative lenders to open up the purse strings. When lending is profitable, banks will provide capital. This is likely to cause a significant spike in fundraising interest in general and businesses will listen to all options on the table.
3. The Industry is Retooling and Becoming More Reliable
Despite scrutiny, the FinTech industry is without a doubt working. Growth companies are receiving funding and lenders are being rewarded with hard profits. It’s a great time to be a borrower. Costs are lower for lenders and for borrowers, and capital is absolutely available. Loans are being processed more quickly than ever before. We are long past the 1950s way of banking and we’re never going back. The FinTech marketplace has also proven to be a great alternative for under-served communities and minority-owned businesses.
There are many early-stage growth companies sprouting from rich, plush entrepreneurial soil. But as the number of those sprouts rise, it can become harder to identify which ones will one day wear the thorns. Luckily there are many hints on the surface that can save you from getting pricked. Here are four red flags to avoid before investing in your next early-stage growth company.
1. High Burn Rates
If revenues are not steadily rising on a month-to-month basis, watch out for overhead and high expenses. Profitability always prevails as the single most important thing in business and as such, the very first dollar the company is able to generate is extremely important.
2. Lack of Support From Early Investors
If the company has already raised capital in their earliest stage, it can be very telling if the majority of investors are not reinvesting. There are many reasons for such an outcome, but you need to nail down why. Maybe the investor(s) simply ran out of capital to contribute, or maybe there’s something else. The key is to learn the reasons behind the facts.
3. Too Many Founders
Now, it’s okay if a company has more than one founder, and actually, it’s preferred by many in the investor market. It’s hard for just one founder to attract enough A+ talent to run a well-oiled machine firing on all cylinders. However, be cautious when the number of founders climb over three. With so many egos left to handle the growth and execution of the business, the growth process can actually lag and even come to a stop. The saying “too many cooks in the kitchen” has long-survived for a reason and it would be remiss to not make mention of it here.
4. No Momentum
When you take a look an investment opportunity, sift through the long-winded numbers and charts and identify what the main metric for growth is. If the metric is not growing at a decent pace (or at all) month-to-month, you can be sure that the investment will carry some risk. But that doesn’t necessarily have to be the nail in the coffin, sometimes all it takes is just a few small and inexpensive tweaks to get the ball rolling.
A business model is at the heart of any business venture. No matter how attractive an investment opportunity appears, it must have a solid way of making money to be worthy of investment – a clear and easy to follow A to Z. There are many different types of business models out there, but here are four which can offer high yield returns for venture investors.
1. Demand Orchestration
Demand orchestration will have a business acting as a third party. This business model creates a location for buyers and sellers to make transactions with each other directly — the business earns a percentage of the monetary exchanges. The most influential example of demand orchestration is eBay. eBay was able to create a platform which provides a vast number of options for buyers and sellers, and by doing this, they were able to attract a huge user-base. This user-base eventually became very attractive to first party services and products.
2. Low Prices
Offering low prices allows a business the opportunity to attract a large share of the marketplace simply because its products are a little easier on the wallet than their competitors. As the business grows, it can develop product upgrades, new ideas and even better service. The idea here is to grab substantial attention from a noisy marketplace. Once that’s been done, and the trust of the market is earned, the business might then increase its prices without losing too much from its share.
3. Reverse Auction
This business model involves buyers offering a price for a service or product. If the seller accepts then the buyer must comply to the seller’s terms and conditions. This model gives buyers a feeling like they are getting a real bargain. The sellers meanwhile can have access to a marketplace which is similar to those offered by demand orchestration, minus prices being set by producers.
A unique specialty product or service results in a limited production to high profit yield. In this model, the marketplace is dictated solely by the producer as their product or service is completely unique and in demand by (usually) a small demographic. If a larger number of people desire the same product or service, it’s likely that other companies will enter the market to compete. This business model does not necessarily need a large customer-base to turn a profit, a small number willing to pay higher prices can be extremely lucrative.