The Key to Securing Business-Backing Cash. How to Motivate Those With Money to Invest in You and Your Business
- This is page 2 of a 3-part article. If you landed here first, you might want to start on page one.
One of the most valuable skills learned by high-performing sales professionals that extraordinarily applies to successful entrepreneurship too is the ability to alter perspective... to get in the other person's shoes and see the very same problem or opportunity through THEIR eyes.
An Entrepreneur hunting for cash backing is very much in a me, me, me mode: "How do I get the backing I want or need?" Those with the money you want have an entirely different perspective. To woo them to invest hard-earned cash in your business, you need to look at your proposition through THEIR lens.
Until this moment, they have probably invested zero seconds in your business concept. They are NOT already sold on it like you are. They do NOT already see the incredible profit tsunami you foresee. Through their lens, you are only ANOTHER complete stranger- perhaps one of a dozen or so they've invited to pitch startup investments to them THIS WEEK. Next week, they probably have another dozen already scheduled. 12 more will roll through 2 weeks from now. And on. And on.
The vast majority of those pitches will not get a nickel from them. Why? Because most entrepreneurs can't get out of me, me, me mode. As harsh as it may be to read: investors don't care that much about your "me" stuff. They don't even have that much care for the specifics of your idea. Their almost-singular focus in this pitch is a mirror of me, me, me: what's in this for THEM? The very few who will get any given investor's money is going to be those who effectively answer THAT question.
To learn the most important lesson on this page, let's change your perspective. Set aside all you think about the potential of your own startup and swap bodies with the investor. Now the person that was you is only one of several strangers pitching their businesses to you today. You are on the other side of the desk or table. As each stranger makes their pitches, ask yourself this...
WHICH ENTREPRENEUR GETS MY MONEY?
On your schedule today, there are four would-be entrepreneurs seeking cash investments...
Entrepreneur #1 is very excited to tell you about his or her great business idea. They have no plan, no team, no business infrastructure, no leads or customers yet… only an abundance of enthusiasm for their fantastic, "bigger than Google," sure thing. They haven't put- nor have much interest in putting- any of their own money into it... instead looking to shift all financial risk to you.
Entrepreneur #2 brings every bit the enthusiasm & conviction you see in Entrepreneur #1 AND also has the idea completely fleshed out in a professional business plan. The plan lays out logical, step-by-step of how to get from here to profitability if you give them the money to actually execute the plan. They also have paid experienced professionals to help them develop a solid plan... and have brought those professionals to the meeting to help pitch the plan to you. The professionals clearly know their stuff and will be directly involved in executing the plan if you back this entrepreneur.
Entrepreneur #3 is basically Entrepreneur #2 (with their own expert team) PLUS they HAVE already put some of their own money into assembling key foundational pieces towards being ready to monetize. For instance:
- They have a modern & very attractive business website ready to sell their product or service.
- Their product or service is in mature form, so they can demonstrate it to you and/or even give you one.
- They have initial marketing creative ready to do the job of promoting the business.
- Etc. They are obviously further along than #2.
#3 has clearly followed their plan- investing in backing their own idea- and looks as ready as possible to start monetizing ASAP.
Entrepreneur #4 is basically Entrepreneur #3 PLUS:
- They have already launched and are PROVING their plan with real orders, revenue & profit.
- Their product or service is already selling and the backing they seek from you is to do MORE of the SAME things that they’ve already proven brought on this initial wave of profitable revenue.
In short: what they seek from you is mostly about scaling up something that is already working well. The bulk of their pitch is in how your investment will directly generate much MORE revenue & profit, some of which will repay your investment quickly with a very-appealing profit.
You can back only ONE of them. Which is most likely to get your money? Why?
Yes, this is a loaded scenario. It should be obvious which entrepreneur pitch is most favorable. Looking through an investor's lens, there is one standout, best choice here. Investors screen with filters like:
- How much RISK is in this investment?
- How FAST will I get repaid?
- How much profit can this make ME?
- How much and how fast could this scale up?
And yes, the business idea, the spirit and related experience of the entrepreneur, the quality of the supporting team, etc will matter to some degree, but those 4 questions tend to rise to the top of the list.
It's time to flip this scenario back around... out of the investor's body and back into your own. Ask yourself a big question: "Which of these entrepreneurs am I right now?"
Making progress from one entrepreneur type to the next one(s) increasingly "greases the wheels" for winning financial backing. The more you bring to their table, the more interested they will be in investing in your business. If you have tangible "skin in the game," you are obviously much more committed to making this work than someone like entrepreneur #1, who is trying to shift all cost risk to someone else, while expecting to retain a good chunk of the upside.
Like any kind of investor, a backer most covets a "sure thing" investment. The ideal scenario is a situation where you pretty much don’t need ANY money from them and/or can secure 110% of the investment (with tangible collateral so that THEY have virtually no risk). As an entrepreneur moves further and further away from a near-certainty ROI for backers, the harder it becomes to motivate the investment(s).
The shrewd entrepreneur- able to put themselves in the backer's shoes- recognizes this reality and will take their concept as far as they can (towards "sure thing") BEFORE seeking outside investment... and/or come to the table with tangible "skin in the game" to mitigate the backer's risk. You must leave the "me, me, me" perspective at the door. They simply don't care about that part, even though those details are what most dominate YOUR own thoughts.
While startup entrepreneurs are often NOT a #4, the point of the above is more about recognizing that if you need backing, you get closer to it as you progress towards monetizing your business. Backers are not drowning in "sure thing" (#4) entrepreneurs pitching them... AND they rarely opt to back nearly "no thing" (#1) entreprenuers. So the task is about PROXIMITY to #4 (and thus distance beyond #1)... if you want/need others to put money behind your business.
How did Amazon start? Bezos needed money to build the first version of the website as well as operational cash. A friend invested $40K and another soon added $100K. $140K in early startup funding to take a long-entrenched bricks & morter retail bookstore concept onto this new thing called the Internet? Yes. And there were investors to back that "crazy" concept.
How did Costco start? Like many entrepreneurial startup concepts, Costco was a "bet-the-farm" play... succeed or bust. Much of their early funding came from what could be towards the worst kind of debt. The earliest purchases and payments to get going were charged to personal credit cards😱 with high interest rates. Was that bold? VERY! How did it work out? Costco recently reported revenue in excess of $217 BILLION.
There are countless other examples like those. Look up the startup histories of the current leaders in whatever industry your business will soon join. You are much more likely than not to find similar details about starter cash. In general...
Big successes start with a good amount of cash... either self-funded and/or gathered from various types of investors or bankers.
We are not aware of ANY companies that quickly grew into giant valuations in a purely organic, word-of-mouth way. In pretty much ALL businesses, cash is the primary fuel of growth. If you have:
- cash, you can push your growth accelerator.
- abundant cash, you can roar to a valuation moon.
- no cash, it's typically trickle-slow growth in the best scenario.
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Starting a business is a very broad topic covered by many websites all over the Internet, so we won't repeat the basics of that here (though we can certainly help you through all of that in an engagement). Instead, we highlight one biggie...
It is tremendously helpful to assemble a great TEAM of individual professionals skilled at the fundamentals of solid business models.
That ONE move can evolve an Entrepreneur #1 into an Entrepreneur #2... and it immediately increases your chances of success... because you are applying specialist skillsets to the core needs of a business instead of trying to do every kind of professional job yourself.
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The FINAL page of this article roars into the Entrepreneur's Pre-launch Checklist and how we can help your startup soar. Just click NEXT below to finish this article...