Trying to raise capital for your early stage business? Searching for outside investors? Wondering how to properly (and concisely) articulate your business plan and put a value on it in order to pitch it? Here is a chapter from my book “The Entrepreneur’s Edge”
Innovate to Raise Hell, Articulate to Raise Capital!
It all starts (and ends) with an ability to tell a compelling story. Captivating an audience with passionate articulation sadly seems to have become a lost art. I often wonder to myself, where did all the storytellers go? Steve Jobs once said: “People who know what they’re talking about, don’t need PowerPoint.”
I certainly don’t think that Mr. Jobs was saying people who used a PowerPoint or similar presentation didn’t know what they were talking about. That would be a false equivalency. However, I do believe that he was making a statement about the act of passionately engaging an audience through the art of storytelling.
People skills have eroded in a world that has, for the most part, surrendered to technology at the expense of understanding the human condition along with the art of being understood.
That said, one thing that has not changed is the fact that while innovation and disruption continue to be the best ways to “raise hell” in a market, it will only serve you well if you can skillfully and passionately articulate your undertaking to raise interest and capital from investors.
Such skillful articulation is particularly important to new business owners and early-stage development endeavors that need co-founders and money to overcome the “proof of concept” hurdle of raising early stage development capital.
Most of the business owners that retain me as an adviser to help with their corporate growth and development strategies as well as their capital raise needs are typically woefully inept on how to properly articulate their “pitch” to clients, investors or potential customers.
Sad to say that most of these very bright people, seem to have missed the day at class (or day in the schoolyard) when the basic communication concept that “in order to be genuinely INTERESTING, one must FIRST be, passionately INTERESTED was taught.
The majority of these aspiring business owners, entrepreneurs, and early-stage business developers seem to think that the first step of the process is to secure capital from outside investors, followed by the building of the value propositions and then introducing it to the marketplace to see if the idea will generate interest.
At this point, an enormous amount of the visionaries time and money has been invested and they’d like to launch their venture and it will take money to get it moving.
Despite the fruitless yet popular tactic (thanks to social media) to lure qualified outside help to aid you in developing and growing a business in exchange for “sweat equity”, tt quickly becomes abundantly clear that no one of merit will agree to help build YOUR business idea into a revenue-generating endeavor for success based compensation only.
It takes money to make money and everyone that you engage along the way must be paid for their time.
The realization of seeing that one can’t get the new business to the next plateau (the monetization/revenue generation stage) without investment capital funding sets in. This may mean selling a portion of your new venture to outside investors, which of course will beg the question “how much is this venture worth?”
Tip #1 – My first reaction to those business creators at this level is to make sure that they understand that if a founder is spending more time seeking ways to get investment capital versus time spent seeking new customers, co-founders, distributors, etc., is to tell them that they are going about it all wrong.
Whilst, it is typical that a first time startup enthusiast will believe that they have a masterpiece already built and that their “sweat equity” deserves exorbitant compensation and becomes a factor in valuing their “pie in the sky” business plan, the only investors that this will attract at this stage are what I call “vulture capitalists” that employ “loan to own” tactics.
In my experience, it is often the perceived valuation of a founders sweat equity (self- serving) and the subsequent expectations of being compensated for it, which creates the primary divergence between a founder and an early stage investor.
Compounding the problem is the mere fact that founders typically fear that they must cede control in exchange for capitalization, which isn’t necessarily true.
Tip #2 is my preaching that using borrowed or invested money in order to increase a company’s payroll is never a good idea. It will ultimately impede sustainable growth and can even result in a foreclosure or make you prey for the vulture investor.
Money from outside investors is way too expensive to use for permanent payroll, and will ultimately deter the next round of a capital raise, particularly PPO’s.
Always keep in mind that in order to attract investors who genuinely buy into your vision as well as entertain your expectations of valuation, it is of the utmost importance to articulate your idea with a brief synopsis, a pitch deck and a fully developed, business plan.
A plan that includes an introduction to the business idea (vision), an executive summary, an overview of the company and industry, a financial thesis and marketing plan that will disrupt and create a buzz in the target market.
Furthermore, the plan must clearly articulate how capitalization will mitigate the risks associated with new business ventures.
Most importantly, (tip #3), you must clearly exhibit that you truly understand the market you are entering, and that your mission statement is skillfully created so that, that target market understands your reason for being in their space.
Now, its time to Raise Hell! (It’s going to start and revolve around a simple and brief well-articulated pitch deck!)
“Capital isn’t so important in business. Experience isn’t so important. You can get both these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn’t any limit to what you can do with your business and your life.” — Harvey Firestone
If you have to, get help to articulate and create a “pitch deck”. It will become your calling card and the nucleus of your business development on paper. It will be the precursor to your business plan, marketing strategy, investment thesis, executive summary, your homepage, etc.
An articulate pitch deck needs to communicate the narrative that you can understand and define the Your Business Space, Problems in that space, Solutions to the Problems in that Space, Why Your Business Will Be the Panacea to problems in that space, and the people that will be behind the stewardship of the business.
To do this properly, you must understand the industry and the ‘norm” of the marketplace. Then create a plan that lets that marketplace know you have arrived with a plan that helps them.
Simply stated, UNDERSTANDING your market is important, but not as important as being UNDERSTOOD by that market.
A properly articulated and passionately delivered mission statement with value propositions is the key and should be pages 1 and 2 of every packet devised. (Pitch Deck, Business Plan, Marketing Plan, Investment Thesis, Executive Summary, Lender Presentation, and the like.
Whether pitching to investors or a marketplace, articulation is the most underrated skill I know of, and in the pursuit of business success, innovation, execution, and articulation (pitching) should be left to the experts.
The person pitching needs to be a storyteller! Charismatic, passionate, personable and knowledgeable. He or she should be able to present without charts or PPP’s, if necessary.
When it comes to developing a “go to market” campaign, the same objectives apply to building the initial business plan. Questions must be asked and answered in the marketing materials. What is the purpose? Does it speak to an audience that you believe is its target market? Will this audience understand your product? Is it an existing business that includes a strategic plan for future growth? A plan for a start-up should include growth for the future.
A plan for growth in an existing business should have the same strategic approach with projections and hard data that will attract investment.
Building a business plan is similar to putting together a puzzle. All the pieces must fit. Trying to put people in places that don’t fit, will result in a colossal waste a of time & money.
Above all, remember this (tip #4), The mission of getting a business successfully launched, must become a purpose even greater than yourself in order for both to be successful.
Thank you for reading and please follow me here on LinkedIn to get notified when I post the follow up to this and my many other posts on business building and entrepreneurship.
May you always have enough of the things you need for yourself and an abundance of the things you’d like to share with others. In this way, your hands will always be extended in friendship and never in want.
Be Well, Stay Well, Treat Others Well, Live With Intellectual Humility!
You can learn more about me as well as my book new The Entrepreneur’s Edgehere: www.outskirtspress.com/theentrepreneursedge