Let’s Talk: Raising Capital (Part 1 of 2)
Wed 13 September 2017 - 9:05 amEditor's Choice | Expert | Featured | Let's Talk | Raising capital
Dynamic Business is proud to present ‘Let’s Talk…’. This exciting new, weekly initiative provides entrepreneurs and industry experts with a forum to share rapid-fire views on a range of issues that matter to start-ups and small to medium businesses.
So, what’s the 411 with ‘Let’s Talk…’? Every Wednesday, we’ll pose a themed question to a line-up of knowledgable industry figures, with a view to picking their brains for valuable insights to share with you, our readers.
Without further ado, let’s get the ball rolling with the first of many ‘Let’s Talk…’ themes – Raising Capital – along with the first of many probing ‘Let’s Talk…’ questions, this one geared towards startup founders looking to scale…
“What’s a sure-fire way to make an investor sit up and listen?”
Deb Noller, CEO, Switch Automation: “There’s only one thing that will make investors sit up and listen. The only thing they care about is traction… Maybe in a red-hot space like internet currency offerings, you might gain some more organic interest. But if you’re not sitting in the epicentre of what all the investors are flooding to fund right now, then there’s only one thing they care about – traction. You must demonstrate that you’re gaining new customers and increasing your momentum. If you can do that, then you can get investors.”
Nick La, Co-Founder, Weploy: “Make noise, have a solution (not just a product) … and know your numbers!”
Tony Wu, Head of Growth, Weploy: “Do insane things to be heard! We once followed a VC onto an 8-hour flight and pitched him as he couldn’t change seats. But also, know who you’re pitching to and ensure your pitch’s ‘why’ aligns to the investor’s ‘why’. This allowed us to gain instant engagement, which allowed the afformentioned VC to ask us the right questions, and allowed him to explore our idea to its full potential.”
Jason Dooris, CEO of Atomic 212: “Smart investors want to be part of a business that offers value and has developed something customers want today – right now. You must be able to show that you can defend your position within the market, and that you will not get steamrolled by the next operator with a similar idea and more drive.
“At the same time, you must demonstrate you can extend your offering further into related areas, to drive it into new markets with new customers via new products and new processes. But even this is not quite enough. Finally, you must be able to prove that you can take all your learnings, all the ingredients that makes your offering valuable, and push these into completely unrelated areas, areas that may not be valuable now but will be treasured in the future.
“These four components are critical: 1. Establish value; 2. Defend value; 3. Extend value; 4. Innovate for the future. Of course, people in the startup space are always talking about how to nab investors. But finding the right investor is just as important as avoiding the wrong one. There are plenty of investors out there – risk-averse investors, high risk investors and people who say they are investors but are no more than chest beaters. Find out who you are dealing with as quickly as possible. The wrong investor can be an anchor on your business.”
Jason Wilby and Jonathan Buck, Co-founders, Huddle: “Every startup must solve a problem for its customers, yet entrepreneurs often skim over this and spend their time arguing that they’ve found ‘the magic solution’. To get people to listen you’ve got to demonstrate that you understand your customers and the problem space better than anyone else. Avoid too many facts and figures and instead show great empathy and a deep understanding of your customers and their lives. By demonstrating empathy, your potential investor can feel confident that you will connect with your customers. It also means you’re more likely to find out what they need and how to sell it to them.”
Julie Demsey, General Manager, SBE Australia: “While every investor is different, there are a few sure-fire ways to get them to sit up and listen. Convey your passion for your business and the problem you are solving. Sell them on the big picture, your vision and why you are the right person to solve this problem and run your business. For brownie points, always drive home that you are solving the problem with a disruptive, global technology. Know your business drivers and numbers inside out, and confidently convey this knowledge and deep understanding of your business and the market to investors.”
Mick Spencer, Founder & CEO, ONTHEGO: “From my experience on Shark Tank as well as bringing on board a family office and very smart seed investors, and now leading into OTG’s upcoming Series A round… nothing makes investors sit up and listen more intently than someone who is confident in their company and confident in their numbers. There is no lying in numbers, and given there is a lot of spin out there, smart investors will cut through that quickly. Founders: know your key financial health fundamentals!”
Will On, Co-Founder & Joint CEO, Shippit: “A warm introduction is 1000x more effective than a cold email. Funding is like a marriage and the quickest way to gain trust is to find a mutual and reliable connection (aka. LinkedIn stalking) who can help facilitate an introduction. After that, it’s about being as concise as possible – a sentence on who you are, the product, traction and finally wanting to organise a follow up meeting.”
James Alexander, Co-Founder, Galileo Ventures and Founder at University of Sydney’s INCUBATE: “If you’re a young entrepreneur just starting out, tell the investor you don’t want their money, you want their advice. It helps you relax, changes the dynamic straight away and if you get along with them, 9 times out of 10 they’ll be more interested as an investor too.”
Ghazaleh Lyari, Champ Ventures and Chair of Heads Over Heels: “Preparation is key for any startup CEO looking to raise capital. Experienced investors meet numerous founders/CEOs on a regular basis and develop a knack for seeing through a sales pitch vs an authentic story. To make an impression with a startup investor, there are basic elements I would cover in a pitch:
- A simple and clearly articulated explanation of what the business does, what problem it solves, and who it does it for – if this can’t be done in a couple of sentences, the CEO is not ready to pitch.
- The size of the potential market – this must be quantified as best as possible. It’s key to give a sense of how big the business could one day scale to be, with the right support and resources
- Execution capability – it starts with the CEO, and extends to the broader management team. Investors decide to back the person(s) behind the story, as much as they choose to back the story itself. Every business goes through difficult periods, especially in its early development stage. The CEO’s credibility, relevant experience, and signs of stamina and resilience are the elements that convey whether she is the right leader for the company, and has what it takes to deliver on its goals;
- Understanding of industry, trends and participants – competition (or its threat) should encourage an entrepreneur to always keep a critical look at the business and be prepared to articulate what it is that the business does differently to others.”
Editor’s note: Due to the volume of responses we received for our very first themed question, ‘Let’s Talk… Raising Capital’ will return for an encore performance THIS Friday (15 September), with further insights for budding startup founders from those who’ve ‘been there and done that’.