5 Investor Questions You Should Be Prepared to Answer

Before you approach investors you should know enough about your startup to answer these five questions.

1.     What is your value proposition? The answer points out what your company provides and why people want it.

2.     Will customers pay for the solution?  nvestors want to know if customers will pay for your solution.  Free usage is not hard to achieve but paying customers is required.

3.     Who is on the team? About half of an investor’s decision comes down to believing in the team and knowing they will be enough to reach the goal.

4.     Why is now the right time? Is there anything in the deal that suggests now is the right time to start this business.  Why hasn’t someone done this before?

5.     What is your exit? This is one of the hardest questions to answer – how will the investor get their money back.

Best regards,

Hall T.

You Need Three Businesses – Not Just One

When I was growing up, they had a saying in business.  There’s the product you market, the product you sell, and the product that makes money.  The example was McDonalds which marketed the Big Mac.  When you bought a meal they would ask “want some fries with that?”  They made almost all of their profit off the coke drinks.  At the time it was rumored to be around 90% profit margin.

In today’s business you need three products:

The product you market – your brand, your mantra, your flagship product that everyone wants.

The product that generates cash—this is basically a service business that pays the bills now.

The product you build to sell as a business unit later–this is typically a SaaS business model that provides recurring revenue.

It can be hard to build a SaaS business when the only thing you are building/selling is the SaaS product. Consider adding more products around it to make the business easier to grow.

Best regards,

Hall T. 

5 Golden Rules of Fundraising Success

There are several basic rules of fundraising that all startups should keep in mind

1. Know your investors—it’s important to know what kind of investor you are looking for and what those investor wants to see in your deal.  Many startups fail to understand what the investors are looking for and end up without a followup meeting after the pitch. 

2.  Educate your investors--after you pitch the investor it’s important to educate the investor through updates about your deal.  It’s often the case the investor is unfamiliar with your application or space.  

3. Build trust—demonstrate that you can be trusted by showing examples of how you’ve performed  in the past.

4. Respect your investors—show respect to the investor and don’t take their time and advice for granted.  When investors see their feedback and advice is not followed up, they turn their attention elsewhere.

5. Focus on current supporters—make sure you keep your current investor and investor prospects updated on your startup. If you don’t articulate progress in your deal, the investor will most likely not know.

Best regards,

Hall T. 

Five More Habits of Successful Fundraisers

Successful fundraisers demonstrate key habits that others can learn as well.  Here are five more habits that will help you hone your fund raising ability:

1.  They practice their pitch—the successful fundraisers know their pitch cold and have it well honed.

2.  They create a plan and then work the plan—they have a list of prospective investors and continually work investors through the process.

3.  They focus on metrics—they keep track of the numbers in their campaign.  They know how many prospects they have and how many they need to achieve their goal.

4.  They ask investors for feedback—they are open to feedback from investors and others on their pitch and campaign.

5.  They demonstrate appreciation—they show appreciation to those who help them in their fund raise.

Best regards,

Hall T. 

Five Habits of Successful Fundraisers

Some entrepreneurs are quite good at raising funding. They know what to say to investors and they do the right things.  Here are five habits of successful fund raisers:

1, Set goals—know what you want from the overall raise and break it down into stages.  The entrepreneur who vaguely requests $1M has not yet thought through the use of funds and most likely needs less to get started.

2. Stick to budgets—setup a time budget for raising funding and then stick to it.  It’s a daily/weekly exercise – not a some time thing.

3. Consider the calendar—starting a raise in the middle of summer or just before Thanksgiving is going to be difficult.  Plan the launch of your fundraise with the investor’s schedule in mind.

4. Know the target audience—understand the target investor and what they are looking for.  It’s a good idea to see what they have already invested in and approach them from that angle.

5. Spend time preparing documents—make sure your documents –executive summary, pitch deck, and financial projections are ready to go so when an investor expresses interest you can provide tem.

Fund raising is a skill just like most other aspects of running a business.  These skills can be learned and honed.

Best regards,

Hall T. 

Five More Reasons an Investor Will Pass on your Deal

Investors see many deals and can spot glaring holes immediately.  Here are five more reasons an investor will take a pass on your deal:

1.     Lack of plausible financial projections—some startups use the excuse that they can’t predict the future and therefore they have no financial projections.  Most investors see this as a lack of knowledge about the business and the market.

2.      Lack of focus in the business plan—some plans are filled with future possibilities and great opportunities but fail to define the core product and how it will be built and sold.

3.      Not knowing the use the funds raised—the phrase “I’m raising $1M often triggers the bull meter because the fundraiser rarely knows how they’ll apply  the funds.

4.     No validated business model—there’s no evidence of a business either in product or customer activity.

5.     Lack of followup – an investor will express interest and then never hear from the entrepreneur again.

Best regards,

Hall T. 

5 Reasons an Investor Will Pass on your Deal

Investors see many deals and can spot glaring holes immediately.  Here are five reasons an investor will take a pass on your deal:

1.     There’s no traction—there needs to be some evidence of market validation.  Even without a sales team and a marketing budget there should be some demand for your product. 

2.     There’s no social proof—there needs to be some evidence the product works.  

3.     The team doesn’t fit your company—if there are major holes in the team or you’ve filled the secondary roles and left the primary ones empty, then it’s going to be a problem. 

4.     Your company doesn’t fit their criteria—many funds are clear about what they invest in (SaaS, Healthcare IT, etc). Your deal needs to fit into one of those criteria. 

5.     You don’t know your market/customer well enough—those with a vague or fuzzy knowledge of the market or customer will have difficulty raising funding.   Ability to site numbers (market size, growth rates, customer spend, etc) helps demonstrate your knowledge.

Best regards,

Hall T. 

5 Signs you Invested in the Right Startup

There are several signs indicating the investor invested in the right startup.  Here are my top five. The startup is:

 1.     Focused on core products and processes—you see a strong focus on the core       product/service and everyone is pushing in the same direction.

2.     Revenue and results—you see the team focused on revenue and hard results and not secondary metrics such as likes on Facebook or user downloads.

3.     Customer focused – you see the team more worried about what their customers think than what their competitors think.

4.     Numbers – the leadership knows their numbers well including sales, cash spend, and runway.

5.     Updates and information—you receive updates and news that includes bad news as well as good news.

Best regards,

Hall T.  

5 Signs your startup isn’t ready to raise funding

1.       The vision is still fuzzy and hasn’t come into focus yet—if you’re still sorting out the market and your position in it then you need to gain more clarity on the space and your company’s position.

2.      The team isn’t in place yet—if you still have major holes in the team that you are seeking to fill, you need to find candidates for those positions before funding.

3.      You haven’t identified the repeatable business model—if you’re still pivoting from one business model to the other then you’re not ready for funding.  You need to have a business model that is predictable at some level.

4.      You don’t have your financials under control—if you don’t know how much to budget for expenses or what the impact of a sales increase on your bottom line may be, then you’re not ready for funding.

5.       There’s no clear path to profitability—if you don’t see how you can grow to a profitable position with your current business model, then you’re not ready for fund raising.

Best regards,

Hall T. 

How to Make the Most out of a One-on-One Conference

The appointment-based event is gaining popularity with those who want to raise funding as it turns a conference into a series of dealflow meetings. Both investors and entrepreneurs are making more use of the One-on-One conference to find prospective matches.

For those not familiar with a one-on-one conference, the venue offers the participants the ability to see who will attend the event and schedule meetings at the event.  The conference also offers panels, keynote speakers, and workshops.  In a one-on-one conference, one participant invites another for a meeting.  If the invite is accepted, the scheduler provides a date/time/location for a meeting.  The meetings are typically 15 to 30 minutes in length. The objective is to meet as many qualified contacts as possible.  Detailed follow up comes after the event.

In running several of these events I’ve seen how some find better results than others. Here are some tips on how to make the most of your next one-on-one conference:

Preparation—a one-on-one conference takes a great deal more preparation than the typical panel/speaker filled conference in which the participants find contacts through general networking.  The conference will provide a scheduler system with profiles of attendees.   You must log into the scheduler system several weeks in advance of the conference to setup appointments.

Fill out your profile – most schedulers offer a place for the participant to fill out their profile.  It’s important to make it compelling to others so they will accept your meeting invites.  

Make it interesting—give the others a reason to accept your meeting invite or to initiate an invite. Show the values in your business and make clear what you have to offer.

Indicate who you are seeking to connect with—it’s fair game to include what you are looking for as others can determine if they fit.

Research the other candidates -–in addition to scheduling, it’s important to research the other participants.   Since some conferences have hundreds of participants, this could take some time so start early.

Login daily to see who else has just joined—new participants join the conference every day in the run up to the event so you have to check back to see who joined recently.

Know the network—it helps to know the community and network as it will help narrow down your list of contacts to pursue.

Best regards,

Hall T.