What’s it take to get on the menu?

Keep reading to find out…

REALITY BITES
Why deals get chewed up & spit out

YOU’VE BEEN LIED TO-by your banker, your broker, your bean-counter-a long line of stuffed shirts who like to hear themselves croak about “getting outside of the box,” only to cram you back into one when it’s time to start raising money for your business.

Don’t get me wrong. These aren’t bad people and they may even be wildly successful, they just don’t get where they are by packaging and positioning early-stage opportunity. Unfortunately for you, all that well-meaning advice can cost you time and money-lots of it.

Alright, so you’re here because you want to raise money. If it’s the truth you seek, you’ve come to the right place. The bad news is, if you’re like most people, you will:

1. Be underwhelmed by the message here
2. Scan the page for what you think is important
3. Miss the real point and move on

If you’re still reading, good for you, because what you just read isn’t merely a profile of how most people surf the Net, IT’S HOW INVESTORS LIKE US SURF OPPORTUNITY.

If you’re in the market for private debt or equity capital and that doesn’t scare you, look down-that line you just crossed may well cost you your business. Sure, you may think you’ve got your act together, that you’re ready to talk to serious money players, but you’re not. I see it day in and day out, and it’s because most entrepreneurs don’t understand one thing: THE VALUE OF TIME.

One of the many benefits a surplus of capital affords investors is the freedom to cherry-pick opportunity and draw a distinction between entrepreneurs and misguided dreamers. This is why we prefer deals we can understand quickly, caluculate the upside and effectively assess the risk.

HALF-BAKED
What are you trying to sell us?

All but the most savvy of entrepreneurs fail to recognize the heart of their own deals and kill their fundraising efforts before they even begin. In order to raise the right kind of money, you need to think like an investor. Remember, you’re competing for mindshare here. It doesn’t matter if you’re a concept stage start-up or a growth company looking to take things to the next level, every successful financing effort begins as a bid for an investor’s time, not his money.

Do your materials clearly, concisely and compellingly articulate the market opportunity and the mechanics of your deal? Probably not. Odds are, it’s a room-clearing testament to the reasons most early-stage deals die slow, painful deaths: Emotional founders, plodding, techno-saturated narratives, muddy corporate structures, baseless valuations, bad investment vehicles…the list goes on and on.

Unfortunately, most of the misguided efforts to slim them down yield nothing more than quarter-scale versions of the original 50-page abominations. BEWARE: Just because it’s short, doesn’t mean it’s sweet. The short-form pitch isn’t a short-cut-it’s an art form.

FEAST OR FAMINE
It’s not just what you serve, it’s how you serve it

If you really want to get an investor’s attention, less can be more-provided you’ve got the right ingredients and know how to mix them up. Find a quick way to whet our appetites with something that’s got the right flavor-not too spicy, not too sweet-and you’ll find us more than willing to sit down at the table with you. Who knows? If you’re the real thing, we may even pick up the check…

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I just love bushy-tailed know-it-all’s—young entreprenerps who’ve obviously never read Michael Gerber’s “E-Myth.” Go forth young technician and conquer the world. Surely your exceptional skills as a salesman/broker/engineer/coder/designer/whatever, will propel you to great heights, once you catapult over your air-conditioned cubicle.

OK, so there’s always a bit of “The Grinch that Stole Entrepreneurial Christmas” in my tone—get used to it, it’s just my style. The truth is, I’ve heard too many sob stories from brokenhearted, pipe-beaten, biz bunglers, who’ve come crawling to us for help, with hopes that we’ll fix their broken deals.

Assuming you haven’t read the E-Myth, the book’s premise is this:

1. “A Technician is not an Entrepreneur.” He is a worker bee that’s become proficient in a particular task or trade. A Technician does not think outside the box, but is spoon fed within it. He dreams of excellence and liberation from 9-5 ham and eggerdom, where one day he’ll be a shot caller. Unfortunately, the hard lessons ahead include not knowing what shots to call, and not realizing that if you’re calling them, there’s no Technician in your place to carry them out. I call this the “how did I get here” and “what do I do now” conundrum.

2. “Systems run the business and people run the systems.” Any modern business which relies exclusively upon experts to survive is not a business, but one or more Technicians playing business–more like a law practice. This model is doomed from the start, and will most likely result in one of two scenarios: a) Having your experts run off and compete against you (regardless of their illusion, it’s still a pain, and you lost your greatest investment in human capital), or; b) They stick around and bleed you for ransom, knowing full well that you won’t replace them or don’t believe you could. The latter leads to an eventual leverage point toward ownership stake, resentment, or both. Either way, you lose.

3. “Entrepreneurs don’t abdicate, they delegate.” You can’t replicate something that works (whether you stumbled upon it or planned it) by dumping the process on someone and hoping it continues. You must take time to fuse your entrepreneurial essences with another, becoming one before separating again. Whomever you delegate to must “see the light” (at least the light of that particular tunnel you’re leading them down). You can later decide where they exit, or whether that light at the end of their tunnel is a freight train. Either way, make it your choice, not theirs. Moreover, serial delegation inspires consistent replication, and replication is a cornerstone of growth.

The net of this Saturday night satire is lesser the effect of boredom than the forewarning of misplaced stardom. Take it as you like, whoever “you” are, and thank Michael Gerber for writing a book about it.

Deals, similar to dogs, often have fleas, and sometimes blood sucking ticks – differentiated generally by those who care for them. To care for a deal, you must have discipline, patience, time, understanding, and the ability to constantly adapt to external stimuli. A great leader not only balances these factors, but does so while others remain awestruck at the magnificent effortlessness of it all.

A great leader is not just a visionary, but a strategist and a tactician all in one. He see the target through a wide angle and zoom lens simultaneously with pinpoint accuracy. Crisis is a walk in the park for these hunters, and nerves of steel are the mark of distinction. He is competent and confident in all aspects of the deal – numbers, cash flow, use of proceeds, funding, valuation, competition, market dynamics, paradigm sensitivity, time management and resource allocation, to name a few. He wreaks of courage and imbues a relentless dedication to fulfilling his destiny, but never through self indulgence or arrogance.

This immortal can:

“walk with kings, nor lose the common touch, and fill the unforgiving minute with sixty seconds worth of distance run.”—Rudyard Kipling

This is where we put our money – in people, not deals. We look for these characteristics to invest our stake, hoping to find the right tail to wag the flee-bitten dog. It is these attributes that attract us most to “the visionary.” We recognize that strategy and planning require fluidity to adapt to changing market conditions, where a worthy Captain with a weather eye, will safely navigate the tides of both desperation and doubt, which swell incessantly.

To get capital, he must become capital – human capital. He must convince us that he knows everything and nothing at the same time about his deal, and should be ready to answer ALL of our questions, perfectly – ones that we claim (and I said claim) not to understand, related to his sector and particular opportunity. We shine the brights lights in his face…

His Retort:

“I have no idea! The evolution of this concept is organic in nature, which is the reason I stand before you. I’ve invested my own money in nanotechnology and micro surgical instruments with hopes of revolutionizing medicine, but I admit I don’t understand the intricacies of the field. I bet on fundamentals along with timing, mixed with a touch of gut instinct. I didn’t expect to walk into this room convincing any of you that I can tell the future, but I expect to walk out leaving all of you wondering if I’m a part of it. Consider me a managed fund rather than a quick pick – I’ll diversify and perform over time – consistently. And when it’s time to exit, I’ll go quietly.”

So there you have it – our archetypical masterpiece of an investment prospect – the creme de la creme of candidates, capturing 100% of our venture dollars, representing 1% of the hopefuls. This is who you must become to dig in our pockets. There’s only one problem … I’ve never seen this character in my life, and I’ll bet no one else has either. What does that tell you about how we really make our picks? Remember Trading Places? You got it…we’re the old codgers that bet a buck on Billy Ray Valentine, and it wasn’t to see him succeed.