Investment is about risk - Set Expectations
Find the right investor based on aligned approach to growing a business not on best terms or the amount of money. Reduce the risk of bringing on the wrong investor and killing your startup.
#1 reason startups fail, decision & personality conflicts between founder(s) and investors.
“When looking for funding, don’t just look for cash.
Look for the right people.”
Jodie Fox - Shoes of Prey
What Investors Look For
Investors come in all shapes and sizes, so it is hard to pin down exactly how to position your startup. But those in prime position for funding have a few common attributes.
Concept and Product have been validated, some revenue.
A clear exit strategy with foreseeable date to get paid their multiple.
Founder/Team experience in the industry
Founders have significant monetary investment in the company
Once you understand where you are, you can then target specific investors and investor groups.
The Pitch Deck
Seasoned investors have years of experience in first impressions from pitch decks. They know how to ask the hard questions and to read between the lines on what is and is not being said. Investors view pitch decks as the the best case scenario and approach them with large skepticism.
The best pitch decks foster further conversations, data packing every slide rarely works well.
Learn how to Fund Your Business
Startup funding comes from many places. In the early days it is founders savings and credit cards. It might even be from the founders full time job if they are starting as a side hustle.
Bringing on outside investors is part art part skill. It comes down to how well you can tell your story.
Audit the status of your startup.
It is essential that you can honestly talk about where your startup is and not just about where your startup is going. Investors want facts so they can make decisions.
Are your per-revneue, do you have revenue but you are not yet profitable. If you are not profitable where is the excess burn coming from, is it a lack of product margin or higher marketing costs? This audit helps the investor understand where their money will go, finding operational efficiencies to lower costs and plowing money into marketing to boost awareness.
Understand your operating costs
Understanding what expenses can be managed via scale and what expense grow proportionally with scale is key to having fruitful conversations with your potential investors.
It is more than identifying costs that can be reduced or cut, it is more about understanding costs when growth occurs.
How you spend money says a lot about how you manage the company, investors will scrutinize your spending habits and projections to glean insight into how you manage your company.
If you've got these answers worked out, then you are investment-ready.
Understand your break even and profit projections
How many units / subscriptions / service offerings do you have to sell to cover the cost of operating your business as it's current state? Now, how many is that per week, per month, per quarter. What is your sales call conversion rate or your cost of customer acquisition?
These are the numbers that drive when a company will be profitable, and knowing them is paramount when talking seriously with investors.
What liquidity events, when investors get paid, as feasible at the current stage of your startup. How many potential companies exist that would acquire you? Is that a path you are willing to purse, so do you want to build a company that goes public?
Most of the conflicts that occur between founder(s) and investors revolves around this area. How the investors will get paid their initial investment plus their multiple. What money can be recouped from selling off assets if the company fails is also a part of that discussion.
Know your worth and develop a marketing budget
If you want venture capitalists or angel investors to support your business, you need to demonstrate a realistic understanding of your marketing budget. How it scales with growth, how it effects the cost of customer acquisition and how (if) it can be reduced when (if) organic traction occurs.
It is all about product market fit for investors, finding it fast and a cheaply as possible. Two things have to be true for product market fit to exist.
A growth rate that is killing the company.
Growing while still making a profit, regardless of marketing costs.
If marketing cost is driving sales at a 1 to 1 ratio, you DO NOT have product market fit.
We make getting investments easy
Starting a small business can be exciting as you take the final leap into becoming an entrepreneur and bossing your own time.
To aid this, there are several funding options available which mean you won’t need to completely bankrupt yourself if you happen to not have the hefty amount of money it takes to start one up.
At Dallas Inc we help you find partners who can help ease the financial burden for you and your team so that you have time to innovate and develop your ideas rather than staying up all night working on spreadsheets for finances!