Avoiding common mistakes when seeking funds to develop your business can put you a step ahead.
I have been inundated lately with stories of companies failing to achieve the funding they should reasonably expect. More surprising, however, is that many of these companies fail to understand where their pitch went wrong, and how to do it better next time.
So I've compiled the top five mistakes companies of all sizes make when seeking funding.
Mistake #1: Working with the wrong perspective
Recently I was forwarded a business plan for a company on the cusp of a global expansion. It has made significant local sales during the past 18 months, and somebody wrote all the 'right' documents for it to get the funding. The documents look amazing. They went to market.
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 advisers.
Mistake #2: Go–to–market strategy is wrong
If you get the go–to–market wrong, everything else falls apart.
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 that people invested in it, most entrepreneurs would (understandably) not change the plan in a hurry.
However, if the investors spot the strategy is wrong, you don't even get the money.
Mistake #3 Looking for the money in all the wrong places
The best strategy for a large majority of businesses is a combination of funding sources.
Most companies can claim some level of R&D tax rebate. It may not be much, but isn't $10,000 better in your pocket than in the government's? It's not to say it's easy to get money off the government, but it is often easier than many of the other options.
If your business is cash flow rich and produces a high level of profits, you should check in with the banks and other lenders. More and more people are also seeing there are many other forms of lending available – cash-flow, leasing, credit cards, and more
For many, this is the only place that is being checked out.
Most investors would gain increased confidence in your business if the government and the bank had already backed it, don't you think?
Mistake #4 Not bringing the right advisers on to your team
How many on your team have already worked internationally or scaled a business fast? If the answer is 'none', then it's probably time to quickly rethink your team.
Advisers come in many flavours. My favourites are members of the board, because when people join your board they're likely to be passionate about your business. When you hire a random adviser, 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 they become your advocate.
Mistake #5 Thinking one solution or person is a cure-all
A common, but mistaken, strategy is to seek a board member who can take on the role of business development manager while also bringing in the first portion of investment capital.
If such a creature exists I would like to hire an army of them.
Here's a better scenario. Find a great board member with a strong commercial acumen.
With the board member on your side you then go hunting for team members like a business development manager and for investors. Not to mention collaboration partners, JVs and other such helpful additions. Business, contrary to common folklore, is not a solitary pursuit; it's a team sport.
Mistake #6 Not spotting the answers
Yes they were right there in front of you; in this article.
More importantly they were right there in front of you, in your business journey.
• Make the perspective, the focus and the vision 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 advisers or team members.
• Prove your go-to-market strategy (sell something), and always base it on known quantities if 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
• Instead of finding one person who is supposed to do it all, look to build an army of super-experts, each doing their bit.
• 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.
Mike Boorn Plener