Most of you have probably read an article or two about funding and the time associated with it. It goes without saying that the process can (and very often is) draining your time and mood. But does it need to be this way? Is it really always that bad?
My name is Alexander Irschenberger, I am a co-founder at Archii where we aim to remove human involvement from document handling. I’m a former lawyer advising companies in transactions – both IPOs, venture and private equity. Besides that, I’m a founder of NJORD Nutrition and an investor in Fenris Motorcycles.
As a lawyer and consultant, I have been advising small start-ups, venture funds and large corporations in venture cases, and there’s are a lot of learnings to share. I’ll shed some light on common pitfalls and share some advice and hopefully help you look “funding-beautiful”. I hope you will save a lot of worrying and time wasted…
“Either you run the day, or the day runs you.” – Jim Rohn
To get one thing clear: no one, including myself, will ever dispute that funding is time-consuming and stressful. Often you run around worrying all the time. And the show is ALWAYS on. Every event. Every meeting. And every email. You need to sell you AND the company.
BUT! I have seen so many founders and executives doing things for the potential investors and not for the company. One example was the hiring of a CTO candidate because of merits – not skills –because he looked good in the investor deck and some investors pushed for it. It ended bad. I.e. the investor suddenly (and often unwillingly) ends up dictating the business for a longer period of time. And it’s not healthy for your business. And it’s not what the investor wants.
Preparation you say? I have a nice deck!
Sometimes you get funding on a pitch deck. It happens. But let’s be honest – those are not first-time entrepreneurs nor the biggest funding rounds.
I’ve assisted in funding rounds for +30 start-ups in multiple rounds at various stages, and there’s one common denominator: preparation sucks when it comes to everything but the investor deck. The result is that a lot of companies are adding a lot of complexity to the funding process by being unprepared – both externally and internally.
Preparation is key for everything in running a business. For myself, I am an “I-didn’t-study-too-much-for-exams”-kind of guy. And that’s a bad thing. SO sh*t, I have learned the hard way that you can’t run a business like that! When you go to exams, you are just you – when you run a company, you have co-founders, employees, interns, customers, investors etc. And they expect you to be prepared. Just as you should expect the same from them.
If you are prepared –or have at least considered the things that the investors look at – besides the business plan, then you’ll come out strong. For instance, it takes about 20 minutes to prepare a meeting agenda and some targets for meetings internally, with customers, with the board, and with investors. If the agenda and target are just somewhat good, it will leave you in charge of the meeting, send a signal of control and calm down your nerves in the more important meetings. Also, it will make your meetings more efficient and yield greater results now that you have defined targets.
Some stuff to consider (some big – some small):
- Do you have clear short-term goals (2-4 months)? World domination is not a short-term goal..;-)
- Is your go-to-market plan realistic? Did you do it in 1 day? Then it probably isn’t.
- Have you spoken to (real) potential customers and not just friends?
- What’s the role of you and your co-founders? Who’s responsible for what?
- Do you have all corporate documents in place?
- Are you registering or paying your taxes?
- Do you have an employment agreement with your key employees?
- If you have customers, what’s the basis of your cooperation in terms of documents?
- What about holiday allowance? Do you pay those 12.5% to Feriekonto (DK only)?
And there’s a lot more.
Be a doer – not a dreamer
A lot of you have a very nice deck, a cool business plan and a budget that aims for world domination. That’s great! Basically, all investors can see through all that and want to see your team and how THAT team can achieve great things. And if you are failing with the startup basics like being realistic about closing customers, having a plan for how to on-board new people and having your administration in order, then you risk standing out as a dreamer. And then you need to fight the uphill battle of conquering their trust in you as a doer – and not a dreamer.
So, what’s the story, morning glory?
Be bold! Do things that are great for your company and not the investors. As I said, they will go hand-in-hand in the end. And don’t be afraid to expose both great and bad things. It will leave outsiders with an impression of honesty and you’ll be likable. No one is perfect. No one.
Take a look at your business: is it running smoothly? Do you have the right people on-board? Are you collecting the right data? Are you using it? Do you have your admin in somewhat order?
So in short: be prepared AND execute!
My best advice: Identify the areas where you are not doing well
You can’t fix them all. That’s the honest truth. So go for 80% and do it well instead of going for a 100% and fail (or even worse: fail to try).
List everything like you were planning for a sprint and prioritize. Here are some points that I normally use:
- What does it affect? My go-to-market strategy? Building brand?
- What’s the effort? Are we talking 2 hours of focus on a Sunday or 3 weeks grinding?
- What’s my investment vs. the outcome?
- Is there anybody who can solve it for me? For instance, salary would take me hours to do every month but it doesn’t cost a lot to outsource.
- Do I need the gold-plated solution? Or can I hack my way through it?
- Can I get sparring to the solution? Get input from the people around you – listen to them.
Intentionally, I didn’t write “find a software that does it for you”. The reason being that I have often seen and experienced that a lot of tools require a lot of administration (no matter the promise). Therefore, I like cool new tools but I use them with caution and actually go through the checklist above as a tool itself.
When prepared, you…
Can do all the awesome things that provide you the efficient R&D, the customers, the great employees or the efficient admin. The things that leave you with a great AND an efficient company. Not all are necessary for everybody (but remember to run through the list above and check.
Then you get the investors! And in that order – because that will get you the best valuation.
GO GET THE MONEY!
*This article was originally published on Apr 9, 2018, on Medium.com