Kalon Venture Partners, CEO, Clive Butkow has a wealth of advice to help entrepreneurs grow their businesses and raise VC capital. Butkow has outlined 10 critical tips of advice for entrepreneurs wanting to raise venture capital and increase their investor readiness.
Ten tips for entrepreneurs
These 10 tips will enable entrepreneurs to achieve the goal of raising venture capital funding along with gaining traction among leading investors.
1.Understand that it is difficult to raise capital. Think like an investor and make the deal attractive to the investor – Less than 1% of businesses raise startup capital – less than 5% of investors get beyond the executive summary.
Make sure that you have an investable business. Put yourself in the investor’s shoes, consider what you have to offer, and ask yourself if you would invest in your own business. Investors look for scalable businesses. A good idea does not equal good business, nor does it equal an investable business.
2.Investors back the jockey before they do the horse – Do not try and take the journey alone. Investors prefer to invest in teams. Make sure to hire the best team on the planet. People are far more important than an idea or product.
Investors look for businesses with strong leadership, leadership with the ability to create the product and to commercialise the product. While many entrepreneurs have a great product or service, they have not mastered the business skills required to build a successful business.
3.Know your numbers and make realistic forecasts – Do not use a top-down approach when forecasting your numbers, instead use a bottom-up approach. Validate and understand your financial figures and show that you have achieved product-market fit.
Your forecast is a hypothesis or guesses – for a startup, it is essential that you have performed market research and spoken to customers that you have achieved initial traction. Explain how you would intend to use the funds raised.
It is important that you do not ask for high salaries as investors will not fund your lifestyle.
4.Bootstrap your company before you raise capital, traction solves most issues. Bootstrapping will help you avoid giving up too much equity and increase the value of your company. Successfully raising capital does not validate your business model. Paying customers are the most important validation for your business. Increase your customer base before you raise capital. Companies such as Hewlett- Packard, Dell, Microsoft, Apple, and eBay all started with a bootstrap model.
5.Know what moves your investors. Investors have “hot buttons”, critical ingredients they are looking for. With Kalon Venture Partners, investing in a great team is our number one priority. This is followed by confirmation of your product-market fit with good traction.
It is important that entrepreneurs prove that they are able to reach new customers and retain them. Your customers must value your product and be willing to pay for it.
6.Hone your selling skills – sell the investment to your investor. No business skill is more important than the ability to sell. Begin the discussions with an investor before you need the money. If you cannot sell your idea, product, or service, the bottom line is that you will not raise the required capital at a suitable valuation and deal terms.
7.Do not fall in love with your product or idea. Instead, fall in love with the value you can add to your customers’ lives. Focus on solving customer’s problems and adding value to them, and this will lead to you growing your wealth. Focusing inwards on the brilliance of your invention or idea while failing to focus outwards on the appetite of the market has caused many broken dreams for entrepreneurs, possibly more than any other single issue. Don’t build a solution that is looking for a problem.
8.Not all money is the same – you want smart money, not lazy money. Investors to advise and assist your business growth. You need 4 types of capital from investors, Mentorship capital, assistance from experienced entrepreneurs, Social Capital, access to networks from the investors, Human capital, access to the best people on the planet, and lastly, Financial capital, finance to grow your business.
9.A proven business model – A model that shows your forecast and a clear path to profitability. Research and prepare a good business model that is tidy, easy to read, and positioned from the investor’s perspective – your business plan is your recipe for success. The plan must be the roadmap from where you are today to when you are going to become profitable.
10.Master your pitch – Follow the 10 / 20 /30 rule of presentations. Use ten slides, for 20 minutes and a large readable 30-point font. The foundation of a great pitch is the research that you do before the meeting starts. The key purpose of a pitch is to stimulate interest, not to close a deal. Focus on the perfect pitch
Register for the free webinar
Date: 6 October 2020
Time: 11am
Register in advance for this webinar held on Zoom:
https://us02web.zoom.us/webinar/register/WN_oWOdmhAgSCOTt0IeRyPCHg
Special guest speaker for this webinar: Greg Chen, CEO, and co-founder of Mobiz, an investee tech startup with Kalon Venture Partners.
This content has been created in partnership with Kalon Venture Partners, a registered Section 12J Venture Capital Company.
