Invest to get Invested

By: Angela Fratila, The Social Partner

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 that 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 where they are. And from this deep connection comes my message to entrepreneurs who are raising capital for the first time, want to cut down on the time to get funded and speed up their growth: Invest to get Invested !

I will break it down into four 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 the team’s own 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 the 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 a business for investor scrutiny is an intensive process and happens in parallel with product and commercial development. Obviously, the preparation puts a serious strain on the internal team. Adding external help is a must — rarely can a team cover all required competences. Free external help is limited to superficial support, some marketing, maybe a little back office work. Good, 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 entrepreneurs need to master the combination of the right introduction, smart supporting information, sharp insights into the investor’s preferences, sector and geography funding benchmarks, current information about the investors 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 in order to successfully navigate the investor landscape, which is anything but transparent.

Angela Fratila has over 20 years of leadership roles in Finance-Sustainability-Management Consulting, in local and global operations covering the strategy design, the implementation of programs, the management of results and the impact evaluation. Angela is the founder of The Social Partner, advisor on best practices at the intersection of finance with sustainability. Connect and work with Angela at TheInvestmentClinic.com

This post was first published on https://www.dobetterwhatyoudobest.com/blog.