How do investors perceive investment opportunities? What are they really thinking when they are being pitched to?
What are their expectaions? What do they want from the deal?
Answering questions like these is exactly Jack Delosa’s area of expertise. In his Anthill Academy course, Jack shares the ins-and-outs of confidently raising venture capital investment.
And it’s not as complicated as most would assume.
The problem is that capital seekers are invariably approaching investors with the wrong mindset.
“What I’m trying to get across is that capital-raising is not about raising capital,” says Delosa. “Capital-raising should simply be a function of building one thing… value.”
Here are some other insights from this course:
Sure, you’re fuelled by passion. But don’t forget to think about the value of your venture as an ‘investment’.
Most entrepreneurs start with a desire to raise angel or venture capital funding.
But chief among the reasons why so many would-be entrepreneurs fail to achieve this goal is because they neglect to look at investing the way investors do.
Capital enables your business to build in areas of need — be it marketing, recruiting, R&D, or supply chain. Therefore, the ultimate purpose of investment is to grow the value of a business.
“Your business is an asset,” explains Delosa.
“It shouldn’t just be a vehicle to generate cash flow and profits. You need to start looking at it as an asset of which profit is only one driver,” says Delosa.
“To frame capital like an investor does, you have to get a firm grasp on what drives value, and use that understanding to convince them that your business is a great investment.”
Raising capital is not about you. It’s about sales… impressing the buyer. So, address the objections (before they do).
When presenting to investors, it’s easy to get caught up in your own agenda.
But, the truth is, investors are buyers, and it’s really all about them.
Overcoming that tendency toward narcissism in business presentations requires you to anticipate the prospective investors’ concerns and address them accordingly. Like a good sales professional, raise and address the ‘objections’.
Investors operate within a game of risk. When they put their money on the line, they put faith in you not to lose their money and to make sure that they get it back – with profit in return.
Investors are aware that, out of 10 companies they invest in, only two or three will repay their money. To secure their investment, the challenge resides in communicating the value of your business well enough to overcome their reservations.
“What we don’t want to do is hide the risks,” says Delosa, “because they’ve already of 10 times more than we have, because they’re looking for risk.”
Communicating the risks involved will help you stand out from the crowd, and will go a long way toward building trust with prospective investors.
Investors are very savvy at spotting risks. It won’t help for you to stick your head in the sand and ignore them.
Investors expect you to be prepared. And their patience is thin. So, get your documentation in order.
Businesses need to present a couple of things to investors, eventually.
The first is the executive summary. The second is the information memorandum, a lengthy document with more sensitive information which is only sent out to investors who have shown an interest in the executive summary.
“The executive summary is a one-pager that, in two minutes, should make the investor go ‘yes, this is something I want to look into further and investigate, or ‘no, this isn’t for me,” says Delosa. A quick no is not such a bad thing.
So, what’s the best way to go about this process? Click here to access the course.