As we’ve outlined on this blog over the last few weeks, the system for raising early stage capital today is fundamentally flawed. Even though the road to success for entrepreneurs trying to kickstart their visions is littered with potholes and deceptive directions, it can all be corrected with a little teamwork. If change is going to happen, we can’t just tease the entrepreneurial community with brief moments of candor and transparency. The only way we truly accelerate the rate at which that innovation is created in this country and solve our financial crisis is for us to come together and provide enormous value back to the very entrepreneurs from which we expect that innovation to come. By the way, that busted road we mentioned…it’s a two-way street.
So without further ado, here, in no particular order, are North’s 10 Rules for Breaking Through:
1. Listen To The Challengers, Not Just The Congratulators.
Turning an idea into an actual operating company is hard work. So make it easier on yourself, bounce your concept off those people that have no problem ripping it apart. Seriously, if all you do is play “show and tell” with your trusted inner circle are you really going to learn anything new? Feedback from candid and objective outsider can often make the difference between your business growing and maturing vs. remaining underdeveloped. Are you listening?
2. Don’t Buy Anything That Doesn’t Provide Value Back.
As mentioned throughout this paper, there are a ton of services marketing at entrepreneurs, especially those that pitch the promise of raising money or connecting you with investors. However, before you take the plunge (or get out your credit card) ask yourself a simple question, “am I getting useful value back?” What you’re doing is hard and takes a lot of time, don’t waste it. Surround yourself with experts that can inspire and help you reach your goals.
3. Those With Fewer Words Win.
We can’t express enough the importance of being able to concisely state your business idea in a very persuasive manner. Investor’s have limited time and even a more limited attention span (do you know how many pitches they hear a day?). If your “single sentence” about what you do and how you make money is confusing, you’ve wasted your breath and other’s time. Take time to dial this in. The results will follow.
4. Talk To Anyone Who’ll Listen.
Okay, quit hiding behind your laptop screen and go talk to people. If you’re too remote and working from a tropical island somewhere (good for you), but at least pick up the phone. Investors know each other and if you talk to large number of them it can actually create more buzz about you and your concept. Healthy competition is good when it comes to raising money. The more options (and contacts) you have, the better off you’re going to be. Lastly, when you’re doing all that talking, be sure you don’t forget to take pauses and listen! (see #1).
5. Momentum Is Your Friend, If…
Don’t waste precious time hunting for cash if you’re not yet “investor ready.” Keep dialing in your business model and make that sucker bulletproof. As an entrepreneur, it’s important to stay focused, inspired, and moving forward with steady pace. If you know which direction you’re going, it’s okay to sprint. On the other hand, if you have no clue where you’re headed, slowdown hombre. Speed without direction is the fastest way to getting nowhere.
6. Start Smart Or End Stupid.
Take it from people who have “been there done that.” Be wise with your time in the early stages. If you’re not truly confident and frequently find yourself second-guessing your path, stop. “Green” entrepreneurs blast out their concept stage plans when they’re not even mature enough to be considered for funding (and then wonder why they hear crickets?). Instead of taking this route, go meet with experts that can help you tighten up your concept, train of thought, and give you an indication whether you even have a viable idea in the first place. You’ll be smarter for it, and a more prepared entrepreneur the second time around.
7. Heighten Your Bullshit Radar.
The early stage investment capital space is crawling with unsavory characters. Do all you can to avoid a lengthy unfruitful and expensive ride on the scam tram. We already mentioned in #2 above that you should seek out value. Well, in order to do so, you must first sharpen your perceptive skills. If someone says they “know how to find you capital” (and they haven’t shown you and credible evidence that they know how), ask them how they intend to do that. Remember during the last presidential race when John McCain proclaimed, “I know how to catch Bin Laden.” Hey, if he knows how to “do it” then why hasn’t he shared it with anyone already. It’s because it’s just desperate drivel from a man seeking votes from unperceptive swing voters.
8. Cash Is King.
Do your economic models scale beautifully? Do you have a solid way to make money? Can you prove it? If this part of your plan is not credible, you will quickly be voted off Start-up Island. No question about it. If an investor were hosting the show Survivor, they’d say, “Bring your business plan up here (after handing it to them, they toss it in the fire). The tribe has spoken. It’s time for you to go. The rest of you looking for funding, head back to camp and work on your financial models.”
9. Don’t Wait In Line.
Quit trying to shout “me…me…me” in the crowded pitch farms. This is a complete waste of time, effort, and money. In order to break through with investors, you’ll have to take risks and do whatever it takes to get noticed. Don’t just show up on the congested scene with one arrow in your quiver. Arm yourself with third party due diligence, a working prototype, or some other vehicle that demonstrates that your business is worthy of attention and funding consideration.
10. Sell Something Dammit.
If you are starting a business, sell something. Nothing builds excitement, momentum, and revenue faster than actually ringing a real register. Far too many new ventures focus on research and development and by the time they have a product, the market has moved. They never got real consumer feedback and they wound up running out of money before they were able to hang that first dollar on the wall. If you want to succeed, make sure the “selling” component is a well-oiled machine. It’s the difference maker.
This is the conclusion section from our recent paper, Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital.