The Tough Get Going

During my years of working at startups and trying to get funding, I have developed a pretty accurate guide on what it takes to raise money. The main reason why some startups are not successful with certain funding entities or organizations is because there is not a "rightness of fit." What that means is unless you have some incredibly compelling reason for someone to invest with you, that they will look for an excuse not to. I can appreciate that one of your founders may be a friend of one of the potential funding organization’s partners, but unless you are talking directly to the guy or gal who makes the decision to fund or not, you are just wasting time with a gatekeeper, and gatekeepers do not go outside their comfort zone.

In addition, too many companies shop their business plans around too much. Yes, maybe you will get lucky, but in between, you are going to get rejected by lots of VCs. The one major potential downside is that the word gets out that your company is desperate for money (and desperate people do not inspire confidence in others). If at all possible, try to get an introduction to the decision makers through a trusted source (attorney, accountant, venture partner, etc.), instead of cold calling. It never hurts to walk up to a potential investor you do not know, but plans that get "thrown over the transom" rarely get reviewed not matter what they say.

My suggestion to any company struggling to raise money is to first calm down, and secondly look at what you are doing right by answering yes to the following questions:

1) Are you in the right market space at the right time?
2) Is your company message resonating with potential customers?
3) Do you have a good business model (pathway to profits)?
4) Do you have a compelling fire in your belly that what you are doing is right?
5) Do you have an exceptional leader and good executive team?
6) Do you have enough money to maintain your team for another 12 months?
7) Is new market data bearing out your original business assumptions?
8) Do you think you will get an intro to well-connected investor, and soon?

If you can answer yes to 6 out of 8 of these questions, where does it leave you? First, make sure you are preserving capital as best as possible, and just keep the goal in mind that you are potentially creating a company that may one day change the world and perhaps make you very rich. Next, you may have to get creative in raising funds by going to potential customers or vendors who can benefit in your company’s product or services and perhaps ask for a pre-payment or an NRE to get a little cash in the door without having to give up equity. Or as an alternative perhaps share some of your future revenues with an investor to take the "risk" out of the investment. Times are tough, and the tough get creative in order to survive.

If you cannot answer the affirmative to at least 5 of the questions above, you either need to take steps to do so, or consider putting your endeavor on the shelf until the storm clouds pass.

Remember, no matter what you do you need to just chill.

The Moldy Middle

While taking statistics during my quest to get an MBA and while earning my engineering degree, the professors always emphasized the importance of finding the statistical mean of any population by using the Central Mean Theorem (a.k.a the highest point of the Bell Curve). As an engineer, this was essential in order to maximize throughput, minimize cost and waste, and ultimately make a better, faster, cheaper widget. A funny thing happened on the way to the dark side of marketing. I discovered that the only thing in the middle of the road was quite literally dead road kill. I do not know if you remember stores like Bradlees, Ames and Service Merchandise (just to name a few), but they all folded because the environment changed and they were caught trying to service the mythological “average customer.” Part of that change came when Wal-Mart began its juggernaut with the discount department store. Wal-Mart did two things right: 1) Focused on “mobile” consumers, and 2) Fo

The Rush to Bottom

I cannot take credit for these words of wisdom, and sadly I do not know who wrote it originally. So, I cannot acknowledge them by name but I can acknowledge their exceptional talent to get a message across with clarity and hard-hitting truths. Whomever this author is, I thank and admire you and take pleasure in sharing this with others! I have also included a video if anyone is interested in sharing it. “When the reward is great, the effort to succeed is great...but when government takes all the reward away, no one will try or want to succeed.” An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said, “OK, we will have an experiment in this class on socialism. All grades will be averaged and everyone will receive the same grade so no one wi

The Saleman's Litmus Test

If your goal is to become a great company or even improve your existing one, every employee in you company should be able to “sell” the product or service that you are merchandising. Since that is usually not the case, you are forced to hire sales people to help implement the objectives laid out by upper management. A national study indicated that less than 3% of the population has an inherent penchant for sales, and as much as 50% of all salespeople really do not know how to sell. During my 20 odd years in sales, I have hired, worked with, and observed great sales people (yes, both men and women). Being the observant type and believing in best practices, I have complied a listing of questions you should ask any salesperson before you hire them, and should use this Litmus Test to review of your existing sales force to determine whether to keep them or cut them loose. I hope you find it useful. Psyching Out the Test : People always try to answer questions the way they think yo

The Profit Prophet

Search This Blog