Shortly after my academy graduation, some of my friends started a small business which of course includes me. Within a few weeks we fleshed out the concept, formulated a business plan and set out to seek financing. With a little hustle, we managed to get an appointment with an acclaimed investment firm to discuss the opportunity. Admittedly our business had yet to earn profit, and none of us had been the CEO of any clothes boutique more so a multi-million dollar enterprise, but we were all assured that we had an abiding affair on our hands. Afterwards all our banking projections forecasted gross revenues of $200 million. What broker could say no to that? But of course we were wrong. I realized we as entrepreneurs need to learn more about real-world fund raising. To this day, whenever I pitch investors for capital, I always remember these hard-learned lessons:
1. Remember that less is always more.
Filling your presentations with flowery words and extensive explanations will not affect investors, and most likely it will turn them off. Present your business in an approach that is short, candied and straight to the point. Investors need the assurance that your business will attract and absorb customers. If they do not get or understand your concept in a short time span, they may assume that your prospects will not accept it either.
2. It is better to execute than hypothesize.
A good pitch should inspire. Provide them with pertinent facts, not fiction. Most investors seek out low-risk businesses with people who have proven themselves successful in other ventures. A company with cash flow, a track record and real-world experience has a better chance of getting investors than a business plan forecasting large returns. Find means to test your business’s capability on a limited budget, and turn your idea into a functional business before you seek investment.
3. Leave the hockey sticks on the ice.
Stimulate investors with a big picture, but be rational and responsible. Avoid hockey stick projections. Respectable investors will not believe you or take you seriously if you present them with banking graphs that shows your company’s revenues will abound from $100,000 to $50 million in three years.
Show investors that you have a grasp on reality with three versions of financial projections: best case, reasonable case and worst case. A good pitch contains facts coming from past and present performance, industry and competitor analyses and of course a series of well-thought out assumptions.
4. It takes time, perfect necessary skills.
Perfect your marketing tactics, sales strategies and operational procedures. Demonstrate that your business can crawl before you say it can walk. Investors appreciate companies with sustainable step-and-repeat business models that are poised for exponential growth. Remember, even Google’s success is based on a single product. Investors are wary of funding over-eager businesses that seem destined to bite off more than they can chew.
Show investors that you have a grasp on reality with three versions of financial projections: best case, reasonable case and worst case. A good pitch contains facts coming from past and present performance, industry and competitor analyses and of course a series of well-thought out assumptions.
4. It takes time, perfect necessary skills.
Perfect your marketing tactics, sales strategies and operational procedures. Demonstrate that your business can crawl before you say it can walk. Investors appreciate companies with sustainable step-and-repeat business models that are poised for exponential growth. Remember, even Google’s success is based on a single product. Investors are wary of funding over-eager businesses that seem destined to bite off more than they can chew.
Before asking for millions of dollars to fund 50 divisions and hundreds of product lines, prove how well you can create, manage and fulfill demand for a single product.
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