From Investment Hunter to Investor’s Prey

Chambers Pivot Industries | Greg Chambers | June 20, 2019

hunter to prey - From Investment Hunter to Investor’s Prey"All I need is an investor, and I’m ready to go," she says.

I'm sitting in front of a passionate entrepreneur who knows I've successfully raised millions of dollars for various businesses.

After hearing her story, what I'm about to say won't be what she wants to hear, but it's true. Funding isn't her problem.

There's more money out looking for a home than there are good ideas to fund.

The problem, I tell her, is she hasn't decided if she wants to build a company or master the growing seed and startup capital environment.

 

Lessons from the past

I was in her seat in the late 1990s shopping my big idea from investor to investor. Eventually unsuccessful, I was forced to abandon my startup and find a job. I took two big lessons from that experience. One is that if I wanted to get a company off the ground, I needed to get much better at selling a vision to investors.

Second, based on the questions the investors were asking, I needed far more evidence from customers that my idea was the right one before they’d invest. Years later, I applied those lessons and started another company.

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My pitch and evidence raised money, but also taught me a new, third lesson. Investors want an exit on their investment, and a pitch with evidence of multiple exits makes it easier to raise funds. This third lesson comes with a side effect which I understood intellectually but didn't understand emotionally until we were deep into building the company. When you take investor capital, your investor's focus becomes your priority.

Since that time, I've come to a fourth conclusion. One that I was trying to communicate to my young companion.

If you turn your focus from raising money to focus on the customer, you will transform from a seeker of investment to someone investors seek. At a high level, we know the best source of  funding is from customers.

That's easy to understand. Think of an unknown artist on YouTube getting millions of views which leads to a record contract. When you're attracting customers, you attract professional investors too.

The funny thing is, I learned this in my first job. I worked side-by-side with a guy who eventually started a chain of exercise equipment stores. We worked at a bicycle shop and he was convinced he could make his fortune in a used fitness equipment business. He talked about this idea every day, saying, "All I need is an investor."

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One weekend, in a fit of desperation, he placed a classified ad offering used equipment for sale. The ad hit Saturday morning and his answering machine filled up with nearly 100 messages before 9am. Armed with this evidence, he spent the day contacting his list of investors, had capital for his store by nightfall, and quit the bike shop on Monday. I used to tell his story as an inspirational persistence tale, but now I use it as a guide for fundraising.

 

Choose wisely

My entrepreneur has a choice.

She can either get great at selling investors, or great at selling customers. She can stay up late learning about LOIs, convertible debt, and cap tables, or put in the hours learning to convince clients they need her help.

The challenge with my friend's fintech startup isn’t the idea or her conviction it's going to work. Her problem is she hasn't convinced any customers to invest in the idea, and now she is asking me to help her sell the idea to investors.

My advice is to get in front of the institutions she wants as customers, get confirmation her instincts are correct about the solution, get a commitment to do business once the product launches, then ask them to fund her idea, today.

It's not exactly what she wants to hear, but since it's just as hard to sell an investor on pre-revenue idea as it is to get a client to fund a startup, she should focus on the latter. The reason is because once the product launches, a customer funded startup will get direct input from a customer with both a financial and business incentive to make it work.

Successfully raising investor funds, on the other hand, will focus on providing an ROI to the investor. In that marathon, my bet is on the customer funded startup because she’ll have a constant reminder of who she’s really working for.

 

chambers pivot industries sales and marketing consulting omaha - From Investment Hunter to Investor’s PreyGreg Chambers is the author of “The Human Being’s Guide to Business Growth,” and consults with growing companies to create sales-and-marketing practices their people get excited about and are a perfect fit for their cultures.  Learn more at https://www.chamberspivot.com/.

 

 


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