How do you keep your business’ growth momentum going?
For decades, the predominant belief was that starting a business is the hardest challenge an entrepreneur will need to overcome. In reality, the most punishing part is when a business is on its way to scale.
It is actually in the scale-up stage where the stakes are higher, risks more costly, the losses great, and the need for cash to finance growth skyrockets.
For the most part, most businesses are not prepared to finance this fast-moving and crucial phase, which is why most of them fail at great consequence.
With that in mind, we present 3 ways that entrepreneurs can alleviate some of the financial pressures when it comes to gunning for uncapped growth and scale.
Next, we share 5 crucial tips on how we have gotten investors to say YES and help clients raise over multi-millions in funding.
1. Make sure your Plan B is better than your Plan A
When it comes to raising funding, the common practice is to look to venture capitals or private angel investors. Well-known Australian firms, such as BlackBird Ventures and AirTree, are top choices.
This move makes sense since these companies can offer substantial and active support that fosters rapid growth and bigger successes for young companies. But your search should not stop there.
You can also opt for crowdsource funding, crowd raising, wholesale raising, family offices, and private equity firms. One important note to remember is that each one comes with its own pros and cons.
As an example, traditional venture capital firms can provide entrepreneurs with an awesome slate of established industry advisors who can help them drive innovation and grow their businesses in exchange for profit shares and decision-making power.
On the other hand, venture capitals also put business leaders under intense scrutiny to ensure they hit the promised revenue goals. If you like more freedom to decide where your scale-up should be headed, this might not work for you.
For crowdsource funding, a massive pro is that businesses can get better evaluations and, therefore, do not need to give away as much equity.
However, entrepreneurs will not be benefitting from the guidance of a savvy advisory board to get them to that next stage of growth, since their investors are ordinary people who are inexperienced in the business and industry.
So, do your research.
Weigh the pros and cons for each funding path. Ask yourself, Why do I need the funding and how do I effectively plan for it? What type of capital do I need to raise and how much? Will this firm/person have the resources (beyond money) to help my business surpass my projected milestones? How much decision-making power do I need to hold on to? Is this firm/person aligned with my purpose and mission?
2. Let your investor assets do the talking for you
Securing business funding is not just about making one big compelling pitch. It is a delicate process that happens slowly.
In our experience, it usually goes like this:
– You talk about what makes your business great until you eventually land a suitable lead investor (more about this below)
– You create an irresistible pitch deck
– You reach out to other networks to fill in the rest of your financing needs
But how exactly do you entice an investor? What do they want to hear?
Investors want to know why your business exists. In essence, you need to talk about what problems you are trying to solve and why your business is the solution.
In the same vein, you also need to prove that your market knows that the problem you are solving is actually a problem that affects them. List out all the metrics around each problem and be prepared to showcase your understanding of your customers and industry.
You also need to highlight that you are actually making headway in your market and prove it through metrics. How does your business stack up against your competitors? Lead with your edge and hammer it home.
And, lastly, give them a clear picture of how you are going to use the funds and what paths you are going to take to make them happen. (For more information about how you can create high-impact investor assets, reach out to us here.)
3. Be ready to pivot if you need to
Mike Tyson, one of the greatest heavyweight boxers of all time, said it best, “Everyone has a plan until you get punched in the mouth”. This is true in every part of our lives, especially in business.
For the most part, we build businesses in a vacuum of data and analysis of what we know to be true from our industry experiences. But things do not always go according to plan, no matter how air-tight your business strategy is.
Investors need to know that the moment you start losing steam, your business is ready to make crucial and rapid shifts to maintain profit and momentum. As an example, we look to Instagram.
Instagram started as Burbn, an app that allows users to check in, post plans, and share photos. What set Burbn apart from the location-based check-in apps of that time was its photo-sharing feature.
After Burbn’s founders acquired the funding and started building the actual app, they reassessed and found that they could take it even further by focusing primarily on one thing: pictures taken using mobile phones.
They then shifted from their original business plan into an even better one and stripped Burbn down to its photo, commenting, and “liking” features, added social media-sharing capabilities, and changed its name to Instagram (a combination of “instant” and “telegram”).
In Silicon Valley fairytale-like fashion, this pivot catapulted Instagram into the social media stratosphere, acquiring one million users in just two months and sparking more investor interest.
So, watch out for trends and plan out your next moves in advance. Focus on the bigger, long-term picture and come up with a Plan B even before you need it.
Ask how you can take your business further at every stage of innovation. What other possibilities can your business live up to? How will that benefit you? And how can you make that happen strategically and realistically?
How do you get investors to say YES?
…is the question that now comes begging. A common mistake entrepreneurs make when raising capital is that, in the heat of the moment, they simply focus on what they need and want. And therein lies the rub.
Instead, treat your investors like your customers. Find out who they are, what they actually want, and how they like to be convinced. Here are 5 ways to do just that.
1. List down companies that offer the same products or services that your company does
Yes, even your competitors. Do a quick internet search, ask around, or tap into connections. Then, make a list of who these companies are.
It is better to have a good mix of companies: Those that did well and those that did not, those that are just starting out and those that have been around for a while, those that are in the same industry as yours and those that are in adjacent industries, etc.
Your investors want to know why you are different. More importantly, they want to ensure that you are doing the thinking and preparations necessary to capitalise on your competitors’ weaknesses.
Remember, weaknesses that can be quickly rectified by your competitors are not compelling enough for investors. True weaknesses come from their greatest strengths.
For example, if you are building something that is going up against the likes of Google or Apple, their greatest strength is their size. But the weakness that comes from that is their inability to be agile in the face of change.
List down all the true weaknesses you can find. And prepare to showcase how your company can rise above or how your company is essentially immune to these weaknesses.
2. Find out who has your money
All investors usually have a particular industry or vertical they like to focus on. When generating a list of who to talk to, make sure to only include investors that would be heavily interested in having a chat.
You may have the best new marketplace app, but if they only focus on Fintech, you are going to struggle to land that first meeting.
If you are struggling to find the right people to talk to, find someone that can get you in the right room. BeingIconic, for example, has forged great partnerships with multiple investors in different industries. Starting these relationships can be hard, so leverage people that already have them.
3. Analyse and leverage your findings to find a lead investor
Why do you need a lead investor?
In the real world, it is very unlikely that any funding entity will help you with raising capital unless someone else has already financially vouched for you. Unless you are willing to shell out at least $50,000-100,000 of your own money to do the raise, you are going to need a lead investor.
It goes without saying that having a lead investor opens doors for your company. Since one investor has already committed significant capital to your business, it makes it easier to establish trust and credibility among their network of other potential investors.
Using your findings, figure out which candidate is most qualified to help you realise your business goals.
Once you have figured out which firms or investors you have the most chances of success with, find out why they invested in these companies in the first place. Which ones did well? Which ones failed? And why?
Next, create an alignment between your company and the ones that did well, while plotting out a robust strategy on how you can avoid the same mistakes that the companies that failed made.
4. Build authentic chemistry
Your investors are pouring significant capital into your business’ growth. Additionally, they are risking their credibility by endorsing you to their inner circles. It is important you get to know them beyond what they can do for you financially.
Before approaching any potential investor, ask yourself if they are aligned with you not just on a professional level, but also on a personal level. Are your working styles in sync? Are you driven by the same purpose? Do you have any shared interests outside of work?
These things are crucial in building strong connections even before you schedule a meeting. So, do as much research as you possibly can. Use what you find to build strong connections the moment you reach out to them and extend the same energy once you meet. But be careful not to overdo it.
5. Present a pitch that compellingly addresses their unmet needs… and beyond
Now that you have succeeded in figuring out:
1) why your business exists,
2) what problems you are trying to solve and why your business is the solution,
3) how you can prove that your market knows that the problem you are solving is actually a problem that affects them,
4) how well you know your customers and industry,
5) how you can prove that you are making a profitable impact in your market,
6) how your business stacks up against your competitors,
7) and how you are going to use the funds and what paths you are going to take to make it happen,
…How do you say all these things effectively? How do you best tell investors that their investment in your company is the next best step toward achieving their goals?
In our practice, we believe facts tell while stories sell.
When driving our pitch home, using powerful storytelling makes us more memorable by helping us connect with our audience and cultivate authentic interest. Stories build emotional connections that increase our chances of getting a positive response to our pitch.
By making your company the main character, your potential investors become invested in your success. And, perhaps best of all, they want to become part of your journey in achieving just that.
In our line of work, we have witnessed just how powerful a compelling pitch deck can be in making any potential investor say YES.
Using diverse networks, skillsets, and industry know-how, our team has worked with numerous scale-ups in successfully building investor assets and securing the funding they need to achieve their goals at a more rapid pace, empower them to become more responsive to change, feed their growth, and maintain momentum.
Partner with us if you want us to do the same for you.