THE SCECRETS of SUCCESSFUL INVESTOR FUNDING
Over the past 3 or 4 years, the Ritz Group showcased over 140 companies pitching for private equity funding for our Ritz Group Shark monthly Attack. Unfortunately, over one thousand companies failed to make the “show” coming through our Pitch Tank. Our Shark Attack mission is to get that “second date” with investors where they look under the hood and kick the tires. Again, the failure rate making through the second date process is also high. VA, ATDC and ATA also have a similar experience.
Why? Simply stated, the Investors (with real money) know the drill!!! They have been perfecting the investment selection process since 1998 and fine-tuned it even more after the dot-bomb of 2002. More importantly, when they find a “winner” they syndicate (share) the deal with colleagues coast-to-coast with someone taking the lead. This minimizes the risk for each investor, enables them to make more investments with their war chest and once “In” provides them with first options to increase their investment in down-rounds based on the company’s successful track record.
So what segregates “Winners” from “Losers”? In a word…..PERFORMANCE.
Each capital funding step – from vision, to revenue, to profit and exit has well-defined funding instrument/s and performance parameters based on where they are in the funding food chain. Knowing where you are and the requirements for each segment…. is essential. Leadership is key, but performance results come from good leaders, their vision and their team.
Why is the Capital Raise so difficult? Because the Investors know the Capital Drill.
The second “thing” Investors know is their investment “Sweet-Spot.” It is always based on what they can “leverage.” This could be based on their background, success, failures, network, portfolio of companies, or connections – like syndicate partners. They stay within their “LANE” and firmly believe they can recognize and pick “Winners” within their segment. It does not matter who, what or where you are if you are NOT in their “Sweet-Spot.” Yes, they set the rules and most often the terms.
So who doesn’t know the “Capital Drill”? Entrepreneurs…and more frequently with today’s high standards and intense requirements – their support team. This includes traditional legal, financial and boards. For many, they simply play “bootstrap boogie” and hope at some point they will wonder into the right scenario and get discovered. And, sometimes that happens.
Today, and in Georgia, countless numbers of educational institutions, organizations, chambers, co-working space, incubators and accelerators are focused on “helping” entrepreneurs build their business. This is key. Raising capital is a multi-step drill.
However, fewer are focused on the “art of equity funding” the business and recognizing the requirements for each funding stage once you have a business – in some form. No business – No funds. No funds – No business. This is the classic “catch-22.” The law of the jungle and natural selection process will take its toll and does at each capital raise stage.
So….is there an answer? For some YES.
The SECRET to CAPITAL SUCCESS begins with knowing the “Capital Drill” and where you are in each stage of the funding process.
Then it’s all about “THINKING LIKE AN INVESTOR.”
For example…..their assessment is rather simple with regards to entrepreneurs
Do you truly have your entrepreneurial “ACT” together?
Or are you just a good inventor or visionary?
Do you have the “Right Stuff” to build and manage a shareholder based company?
Or are you a really good employee with missing leadership skills?
Do you truly have a compelling Value Proposition?
Or is this a one of a kind too small for equity funding, or is it a bridge too far?
Do you really have a Proof of Principle? This means…. have you convinced any non-related family members or paying customers, or strategic partners that the market needs your offer?
Are you pro-actively focused in the right capital market seeking the right investors based on where you are in building your business? Are you ready?
Or, are you “stuck” waiting for the “world” to discover “YOU”
Are you in my wheel house?
Can I sell you to Capital Syndication Partners as a lead or follow.
As a part of the Ritz Group 3.0 Mission we have become more engaged to “Make Deal Happen.” The results have been eye-opening and I will share more WAR stories in subsequent BLOG posts.