Lets face it, if finding capital for your venture was easy, then there would be no such thing as corporate advisers out there selling you the value of advice.
As I sat with another prospect today, who incidentally became a client at the end of the meeting, seeing what I see time and time again, I thought I would make a record of it formally and talk to you about it.
Lets assume that there is limited capital out there.
Lets also assume that not every capital provider is excited by your sector, you or your style – so matter how exciting this opportunity is to you or another person, there are just some investors who are not interested.
Lets also assume that some investors who might be interested, are busy on something else at the time you are looking, or are fully invested, or are overseas – just not contactable.
The long and short of it, as your pool of investors shrinks the more we think about it, it is no wonder that it is considered a difficult to find venture capital.
SO – if you pitch up to a potential investors office, or send them an email with a poorly laid out information memorandum, business plan, or your numbers don’t add up, or even if you under sold, god forbid, your idea or business as an investment, you will have reduced your chances of getting this investor on board, and your overall pool by 1. Who knows, they could have been the one. When you are dealing with such a scarce resource WHY would you take the chance.
Here’s the crux of it. If you have a great business, a great idea and you want to position yourself for a win every time, then you need to test out your idea, test our how you are presenting it, how it is likely to be perceived, what an investor will think about it, how they will react …. All BEFORE you actually communicate to one!
Someone said to me don’t pitch your services on your blog – people will run a mile – so I won’t then. I will do this for free. With this client above, I spoke with him for an hour on the phone, read through his IM and business plan, and gave feedback over several emails over the course of 2 days, and then had 2 hours in a meeting discussing what needed to be done to position his offer more effectively, …… all for free.
Capital is the lifeblood of every investment. Without capital, there can be no product, no property, no sales, no cash flow. Check out Robert’s video about his experiences raising capital for his first entrepreneurial venture. In pitching his investment workshop, Robert Kiyosaki discusses: * Robert’s experiences raising capital * Why raising capital is the #1 skill of an entrepreneur * How you can develop this skill to benefit your business and real estate investing.
Whether your current or future investments involve business or real estate, raising capital is vital to keeping your investments alive and producing cash flow.
Often you hear people compare a new venture to the opportunity that has passed us by … just as if we had been offered an opportunity to invest in Google (or Microsoft, or eBay, or amazon.com), and passed it up. By not investing in Google, or eBay, or amazon.com …just imagine your loss. If you had that chance now, of course you’d take it. Or so the logic goes. (The recent marketing by Dubli heads down this path…)
But here’s the funny thing … the start of Google had Sergey Brin and Larry Page wearing out shoe leather around Silicon Valley trying to get capital … endlessly pitching … and with lots of smiles. But no cash.
(Source: The Search, John Batelle)
It wasn’t until 1998 that Andy Bechtolsheim put in some cash, and the real success story starts from there and other funds coming in after that – including Jeff Bezos of Amazon fame. At the door knocking stage it didn’t even have a revenue model or a company structure (it did have a name, having just changed from being BackRub)
So, what did all those venture capitalists not see, that in retrospect seems like such an amazing opportunity.
Whatever it was… here’s the lesson: venture capitalists miss opportunities daily. And they don’t mind.
And this also presents your challenge. Even when you (think that you) have a sure thing, that the market needs what you have and that anyone would be mad to not want it… remember that you are competing with so many other opportunities put before them, that the chance of them passing on your opportunity is high.
If smart people can pass on Google, then they can pass on you.
There are some valid reasons for this. In the early days, Google had fantastic technology but a poor revenue model. In fact, it is possible that if it were not for the hype around dot coms, a plan as skinny on detail as Google’s would not get off the ground even now.
Your job as an entrepreneur, is to make sure you have a strong business model and can convey to a potential investor how you will commercialise your technology, and what their risks are. And of course what the upside will be.
For a great read on the steps that lead Google to where it is now, check out The Search. . Or here.
Just a note – the Google founders had a real life “start in a garage story” – much as Microsoft did. Their frugality extended to their celebrations on receiving their first investment: Burger King.
