By Antonio A Arias
At angel investor forums, it is quite common for entrepreneurs to make the mistake of over selling its projections with little discussion of its past and present financial status. Therefore, the story does not flow and only begs questions distracting us from the value proposition.
Remember: financial investors (unlike strategic investors) are interested mainly on how they will get a return on their capital and when. For a short ten minute pitch, hit the bullet points fast.
How much was invested by the founders and other shareholders? Where did the money go? What were the results or milestones?
What is the status of the business? Sales funnel? Sales traction?
How much funds are needed to move forward? Use of proceeds? Expected results?
The key is to earn the investors’ confidence fast. There is no sense talking about the projections without a quick recount of the past performance and present realities. Unless the business has proven its marketing strategy, reporting on the customer development status is the more meaningful information. Defending a 3 to 5 year financial forecast and valuation is a total waste of time.
Establish instant credibility. Always show a financial forecast starting with the past and the present.
By Antonio A Arias
Raising capital is a work of art and science. You cannot do one without the other or neither one is more important than the other. It is logic and emotion combined. Other investors have their criteria, I have mine because I have gone through it myself at different stages in my career as a professional business manager in the corporate world and as an entrepreneur. If you are raising capital, it is imperative you understand the investment criteria of your investor targets.
- Exit strategy – you have exited before or you have a clear pathway to exit to return investors’ money with capital gains by a certain time.
- Market Problem – you have a huge underserved market with a chronic pain.
- Team – you have an extraordinary management team with the tract record and the killer instinct to win its sector.
- Product – you have a solution(s) to relieve your customers’ pains; not a solution looking for a problem
- Price – You have priced your product where the benefits far outweigh its cost.
- Competition – your team and your product possess unmatched competitive edge.
- Mission – you lead a mission driven company aligned with values striking a balance of social and financial returns.
- Relationship – you build and nurture a longer term relationship with all stakeholders – customers, employees, investors, and partners.
- Ownership – investors are aligned with your mission and proud to be part owners or passive partners of your business.
- Accelerator – you graduated from an accelerator or incubator group, or have core advisors that are market leaders.
If you are an investor or an entrepreneur what is most important to you and why? Your comments are much appreciated.