Building an investment ready business is both an art and a science. It takes research, planning and a product that solves a pain in the market. It also takes knowing when to trust your gut and make a move that will truly take your business into the stratosphere. That intuition is a combination of entrepreneurial sense and "been there, done that" experience. It is the ability to execute and know when and how to make adjustments. The more you are involved in a start-up the better you are at recognizing the signs and taking the appropriate action. That is why good investors value those that have failed, and learned, as much as they value those that succeeded in a previous start-up. It is the experience you gain that is important, whether in a winner or a loser.
Having said that, what if this is your first cut at a start-up how do you avoid the pitfalls of many first time entrepreneurs? One way is to tap the experience of others. Using resources like ours at the SBDC or TechColumbus provides experienced advisers that can help you move forward. Networking and meeting other entrepreneurs through on-line sources such as Twitter or Columbus Tech Life or live meet-ups like are found at Columbus Tech Life Meet-up can provide mentors that are willing to help along your journey. It is truly amazing the power of these resources to connect entrepreneurs.
One final resource I want to mention is our upcoming Capital Crash Course 2009. This has become an extremely popular event for those looking to get a lot of information in a very short time on building a high-growth, investment ready business. This is the sixth year I've put this together and I think this might be the best overall line-up of speakers we've ever had. I want to touch on some of the key points we are going to cover and why they are critical for entrepreneurial success Download capital_crash_course_2009_agenda.doc.
Point One ~ As I've mentioned before experience is a great teacher. One of my favorite entrepreneurs is Patrick Murphy founder of Brand Thunder. Patrick has been successful in accessing investment funds both from TechColumbus and the Ohio TechAngels fund . Why has he been successful? Because he knows his customers. Back when I first met Patrick he was bootstrapping Brand Thunder. He was doing everything himself but what set him apart was that he was out talking to customers finding out what their needs were and modifying his product accordingly. His product and customer knowledge is what interested me and TechColumbus and eventually helped him raise funds.
Point Two ~ I talk to people all the time that have a business idea and are hellbent to pursue it but haven't really done a go/no-go feasibility plan. I feel that you really need to take this a step beyond just running the business numbers. It is important that you have an idea of whether the business will work
for YOU not just work...there is a difference. A business idea may
have legs but until you have determined what you want and need out of
the business it is difficult to ascertain if you should proceed.
Point Three ~ You may have a feel for how much money you need to raise for your business to move forward but do you know what a convertible, participating preferred stock is? What if the investor requires anti-dilution provisions? How would that impact your cap table in the case of a down round? Enough said, knowing what the numbers and terms mean that VC's will use will help you negotiate a deal that is fair for everyone involved.
Point Four ~ Regardless of what you see on the late night commercials with that nut running around with the question marks on his coat (man, that guy makes my job hard) there are really not millions of dollars of government money for you to start a business. Most government financial programs are loan based. They may be targeted and offer special preferences but they are loans. However, if you are doing science and technology research there are Small Business Innovation Research grants (SBIR) available if you qualify. There are tricks to playing this game and knowing them can put you in a better position to get the award.
Point Five ~ Another source of funding is through the TechColumbus TechStart program. TechStart is a $22.5 million initiative to build and grow technology businesses in central Ohio. What many people don't understand is how to prepare their business to qualify for the funds whether it be TechGenesis, Regional Commercialization or the Ohio TechAngels. There is no application to apply for the funds. What you need is a solid, scalable business model. You also need time to work through the learning curve with TechColumbus. They need to understand your business, help you adjust your business model if needed and be confident enough in your opportunity to put you before the various funding boards (of which I am a part). Moral of the story...start early meeting with us and or TechColumbus, it's a process.
Point Six ~ What if you really don't have a business but have a product? What if you would be better served partnering with a larger business to take your product to market? These are legitimate options that many entrepreneurs don't think about. If they are options learning how to negotiate the licensing terms or the joint venture agreement is critical if you are going to survive.
Point Seven ~ To get funded you need to turn your Idea into a Deal (that would be a good name for a blog). Knowing what is on the investor's mind is critical. Know what peaks their interest and gets them to understand your opportunity is what will get your deal funded. How about a sneak peak at what investors expect. This is from Capital Crash Course 2008. It's the full hour angel panel presentation from last year. Full of good stuff and you can expect more of this at this year's event. New panel, new insights including John Huston's presentation "How Do I Make $10,000,000?
One of my favorite saying is " Being forewarned is forearmed". Be prepared to succeed. Don't hope you are ready...be ready.
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