Angela Fratila has over 20 years of leadership roles in Finance-Sustainability-
I would start by saying that this article will not say anything new. The quantity of articles and free templates available for entrepreneurs to get ‘investment ready’ is overwhelming. And yet, surprisingly and sadly, so is the number of businesses which need funding but are unprepared to face investors.
With every business I coach, I experience a growing attachment as we go through the preparation together. I have a lot of admiration, respect and empathy for the hard work and dedication of the entrepreneurs, for the pain and the resilience they demonstrate to get to where they are. And from this deep connection comes my message to entrepreneurs who are raising capital for the first time and want to cut down on the time to get funded and speed up their growth: Invest to get Invested!
I’ve broken it down into four key parts:
#1 Realise that getting funded is a process not a one-off action
As a rule of thumb, it takes between 6-9 months to complete a funding campaign. It is a gradual evolution, from internal alignment to intensive public presence, requiring different types of resources – some could be in-house, but some are better found externally. Finding the right balance between internal capabilities and experts’ services is key to move forward in the funding process. This is not a plea for working with experts (I am biased here, of course), it is a plea to recognize your own team’s strengths and plan to fill the gaps, in a timely manner.
#2 Take time to prepare before approaching investors
Most entrepreneurs can eloquently speak about their product or service, the technical features and quality. There is predominantly less eloquence about the market position, the market entry or the market protection, the differentiation vs. competitors, etc. There is less convincing talk when it comes to product development strategy in the long-term, intellectual property, etc. Too many entrepreneurs are not prepared to defend their valuation estimate with a solid, professional financial plan.
#3 Accept that there are costs associated with good preparation
Preparing a business for scrutiny requires resources and time. Preparing the business for investor scrutiny is an intensive process and goes in parallel with the product and the commercial development. Obviously, the preparation puts a serious strain on the internal team. Adding external help is a must – a team rarely covers all required competences. Free external help is limited to superficial support, some marketing, maybe a little back office work. Good and efficient external help comes at a cost and failing to recognise this reality is a cost in itself: the funding process gets longer, and the cash burn is higher.
#4 Recognize that approaching investors is more of an art than a science
There is no single proven way to secure funding from investors. The pre-selection made by investors is an imperfect process. In hindsight, many businesses turn out to be selected or deselected based on false positive or false negative screens. One investor’s reason to reject is another investor’s reason to fund a business. That’s to say that, in this imperfect process, where rules are sometimes unclear or unexplained, the entrepreneur needs to master the combination of the right introduction, smart supporting information, sharp insights in the investor’s preferences, sector and geography funding benchmarks, current information about the investor’s in funding mode, their past investments and track record … and more. A good strategy, serious research and segmentation work are required to define the optimal approach for, say, the top 5 target investors.
Invest to get invested! – simply a reminder for entrepreneurs to reflect on which help is best to engage with and to navigate the investor landscape, which is anything but transparent.
This article was written by Angela Fratila and was originally published on The Social Partner‘s blog on March 11th, 2018.
Connect and work with Angela Fratila at The Ground_Up Project’s Investment Clinic or at The Social Partner and get the expert advice you need to be fully prepared to present your business to investors. You can also listen to Angela as part of The Investment Clinic’s LIVE free monthly webinar series where investors answer your questions.