The Smith Report - Operational Playbooks

Raising Money – Exceptional Preparation

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Raising Money – Exceptional Preparation

The odds are stacked against you. You knew that. Even for serial entrepreneurs like Dharmesh Shah (founder of HubPpot) who despite compelling evidence struggled to raise angel money after his fist big hit. At a recent Founder Dialogues event he explained that he had totally underestimated the difficulty of persuading the money men to back him. Demonstrating that difficulty he personally wrote a check for $500,000 to kick-start HubSpot!

Well few of us can write large checks the first time round (including Dharmesh) so how can we change the odds – by executing exceptional preparation.

PREPARATION
Selecting Advisers:

You could do it yourself but you have a business to run so my advice would be you need help. Therefore select using these criteria:

• Credentials – references from the last 3 institutional finance raising projects and a list of all deals done
• Personnel – resumes of people doing the work
• Chemistry – can you work with the individuals on a daily basis
• Sector – a list of sector related experiences

Business Plan

What do I cover in my business plan and my executive summary? Write an enjoyable compelling story that covers:

• how much money you need,
• how you will spend it,
• how much your business is worth,
• why customers love you,
• how you will make money,
• why is it scaleable,
• what makes your leadership team credible,
• what is the competitive landscape, and
• explain barriers to entry and the risks of what could go wrong.

Prepare many what-if scenarios. Use a powerful one page executive summary to get interviews and then use a few power points as props to deliver your story. Talk with confidence knowing your speech is backed up by a rigorous business plan.

Build a business plan that summarizes the policies you need to run the business. Ensure all key policies are articulated in a detailed way. A great business plan allows you to produce a great one page Executive Summary.

Grooming Stage

First, gather together answers to questions that will be asked by the business angel, venture capitalist or private equity player.

  1. What is the status of your industry in terms of trends and statistics? The key is to sound authoritative. Demonstrate that your team understands this market without being verbose.
  2. The value proposition – does it connect with customers? Why now?
  3. What makes the management team credible?
  4. Which analysts validate your strategy?
  5. How will you make money?
  6. Be clear on the itch you are scratching! What business am I in? Be clear why you are remarkable.
  7. Is it a very competitive space and if so why will you succeed? Little competition – does anyone want to spend money on your solution?
  8. How will you win new customers?

Get on top of the detail. Memorize key facts. Be ready to explain the volume and yield drivers behind you historical numbers. Show your mastery of the economics of your business.

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About the Author

Ian founded The Portfolio Partnership (TPP) in 2010. TPP is an operational consultancy focused on scaling private businesses safely. He believes his resume of building 4 previous businesses from publishing, investment banking to software in Europe and the States gives him a unique set of skills and a sense of humor. He remains a competitive masters track & field athlete and in 2012 was ranked #2 indoors in the world for his age at 400m.