The failure of getting funded

I’ve had enough! Over the last six weeks the number of horror stories about companies not achieving the funding they should reasonably expect has led me to grab the pen on this early Sunday morning. Below you’ll see the top FIVE mistakes that commonly trips up the best laid plans of mice and men!

 

Mistake #1: Working with the wrong perspective

Last week I was forwarded a business plan and IM for a brilliant company. They’re on the cusp of an exemplary global expansion. They have made significant local sales over the last 18 months, and somebody wrote all the ‘right’ documents for them, to get the funded. An these advisors were supposedly ‘professionals’. The documents look amazing. They went to market.

Then nothing!

Many months later it is now clear that the documents will never raise a cent. They tell the wrong story. So what happens is that potential investors simply get the wrong perspective. And that’s either confusing or unattractive, in either case it doesn’t release funds. And it casts doubt on the ‘professionalism’ of the firm of advisors.

 

Mistake #2: Go–to–market strategy is wrong

I see this all too often. Which is why when we at Business Connector work with companies looking to raise funds we start here. If you get the go–to–market wrong everything else falls apart.

Ironically there are two scenarios

If you get funded on the wrong strategy (many have) you get the money and start burning it. And given the plan has been validated by the fact people invested most entrepreneurs would (understandably) not change the plan in a hurry.

However, if the investors spot the strategy is wrong, guess what? You don’t even get the money!

How wrong does wrong get? Recently I sat with a founders team who were planning to take a new product (unknown) into a new (unknown) market, instead of taking the same product into the market they already have a stellar reputation in. Go figure!

 

Mistake #3 Looking for the money in all the wrong places

Gold-List2-150By listening to a lot of business owners we discovered the best strategy for a large majority of businesses is a combination of funding sources. What I mean by that is;

Grants: Most companies can claim some level of R&D Tax Rebate. It may not be much but isn’t $10K better in your pocket than in the government’s? How about export support when you go global? How about all the bigger programs!

Lending: Over the last 12 months I have interviewed a number of business owners who have had great success with lenders. And put up no security. If your business is cash flow rich and produces a high level of profits you should check in with the banks and other lenders. You’ll be surprised. (And if your business does not produce cashflow and profits, maybe you need to take a closer look at that first.) More and more people are also seeing there are many other forms of lending available; cash-flow, leasing, credit cards, and more

Investors: This is for many the only place that is being checked out. Yes, getting investor money is a great step up, but what if there was a ladder you could use to scale the mountain that getting investor funding often is?

Most investors would gain increased confidence in your business if the government and the bank has already backed it, don’t you think?

 

Mistake #4 Not bringing the right advisors on to your team

So you want to build a fast-growing global company? Great! But look around you and see how many on your team have already worked internationally or scaled a business fast. If the answer is ‘none’ then probably time to quickly rethink your team.

Advisors come in many flavours. My favourite are members of the board. Why? Because when people join your board they’re most likely very passionate about you and your business. When you hire a random advisor (and my observation is that most are hired on a rather random basis) they’ll do the job and then move on. After all that is what you pay them to do.

You hire a board member and, guess what, they become your advocate—24/7! Even better if you’re smart about hiring that board member they can help you hire that advisor as they will have your best interest at heart (doesn’t look good that a company you’re on the board of is tanking).

 

Mistake #5 Thinking one solution or person is a cure-all

Which brings us right into this point. Chimeras in the mind of the entrepreneurs! Just a few days ago I heard it again: “Just go and find the board member who can be our front line BDM and will also bring the first portion of investment capital in.” Really? If such a creature exists I would like to hire an army of them!

While there may be a person out there who could match all this they’re few and far in between. Instead here’s a better scenario: Find a great board member with a strong commercial acumen. Depending on what specifically you need this could match all sorts of people from CFO’s to marketing experts to coaches, but they have to have a strong commercial sensibility.

With the board member on your side you then go hunting for team members like a BDM and for investors. Not to mention collaboration partners, JV s and other such fun. Business, contrary to common folklore, is not a solitary pursuit (“It’s lonely at the top”) but a team sport.

 

Mistake #6 Not spotting the answers

Yes they were right there in front of you. In this article. But more importantly in your business journey. The question is: Are you truly ready for success? If you are then avoiding the five core mistakes above will serve you well, instead look for the opposite of each:

  • Make the perspective of the business clear cut, keep evaluating, and keep enhancing it
  • Make sure everybody supports that. If they don’t, it’s probably best to switch advisors or team members (as painful as that may be)
  • Prove your go to market strategy (sell something!), and always base it on known quantities if at all possible
  • Be open to funding from all corners. And expect if you have a large project the funding will come together from a combination of sources. Not just multiple investors but through collaborations, loans and more
  • Expand your team with people who care about you, your business and what it will bring to market
  • Look to build an army of super-experts each doing their bit instead of finding the person who is supposed to do it all.
  • Keep learning and growing.
  • And last but not least: It’s a beauty contest! The more attractive your business is to investors, to customers, to potential team members, the easier it all becomes. Thankfully beauty is more than skin-deep!