You Want Investors’ Money? Stop Selling the Labor Pains. Show off the Baby!
People don’t bare gifts because of the labor pains. They bring gifts to celebrate the new creation.
Summer is almost upon us: graduations, proms and last couple of investors’ conferences before vacation time. I’ll be heading to Silicon Valley Open Door (SVOD), a technology investment conference, in San Francisco, and to the RESI (Reinventing Early Stage Investment) conference in San Diego, which focuses on life science companies, as part of the investors’ panel. I’ll meet with the founders seeking funding and discuss opportunities with investors during one on one breakout sessions.
If you are one of these founders, here is what I will be looking for:
What have you achieved? What milestones have you passed? Are you generating revenue? How have you proven you are solving a problem?
These days, even angels tend to behave like VC, looking for traction. As an early stage company, and more so for those in life science sector, traction can be a daunting concept. You most likely don’t have revenue yet but there is always slow and measurable progress to leverage. Maybe you have identified and proven your target customer with sign up for upcoming trials; maybe you have endorsement from recognized scientific entities or perhaps pursuing a co-validation.
What does tomorrow look like?
What changes do you anticipate in the market place? How will you still be relevant? You don’t have to know exactly, but based on trends, data and research, how are you directionally correct?
From the time you conceptualized your idea to the first research/iteration to today, most likely a couple of years have passed. With seven billion people on the planet and the increasingly speed of change of technology, two years is a very long time. Everything in your industry that happens outside of your business will affect your company. The more you know about your industry, the more advantage you will have and the best leverage you can build.
How will my money advance you?
How much money will you need to get you to market and revenue generating? What is the timeline? Ask for what you need. Investors don’t want you in capital raise mode all the time. Why? Looking for money is a fulltime job. How are you moving the needle if you are working to raise capital permanently? I hear your objection already! Valuation. Raising in tranches allows you to build your valuation. Amateur move! When I was on Wall Street I was the Wolf and I would eat you. Lucky you, now you can have a wolf on your side!
Satiate my greed!
Methodically show me how I am going to multiply my investment. Two reasons why an investor invest: 1) Fear: the fear of missing out, and 2) Greed: in the words of “Mr. Wonderful” (Kevin O’Leary from Shark Tank) “I like money”. Never underestimate the power of greed.
André F. Wilson Sr. is the Managing Partner & Funding Maverick, at Altima Business Solutions: Capital Acquisition, Critical Path, Outsourced CFO, Strategic Selling and Advisory Board, for startup, small and medium-sized businesses.