Of course at first, my client cringed to the idea of giving portion of her business to strangers, and why not; it’s her baby, her idea and she had poured amazing amount of blood, sweat and tears for three years to get it to this point. Then I posed these questions to her; do you agree that you need equity investment as a source of capital to grow your business? And are you willing to entertain the fact that in order to grow your business you need to share both income and outcome with others to achieve greater success? She said yes.
Sensing that she has strongly committed herself to the notion of growing her business through investor funded process, I moved on to the next stage of qualifying her and her business from an astute investor’s point of view. My approach here was to create a viable business model by capitalising on my client’s story, place the business in the right state of mind and develop an effective strategy before going to the market. I drilled down into the business idea and delved into questions like; what are the attributes of your business idea that ensures it has a high potential for success? What is the growth strategy that you have applied up to this point? What have you done to stimulate that growth, and how are you managing the risks associated with this growth?
My approach so far had been to educate my client to the fact that establishing the criteria of how the new capital injection would help grow her business whilst exploring the constraints to growth and how she can remove them, are fundamental factors in attracting serious investors. Potential investors would want to ensure that the new business model will be able to scale and sustain meaningful growth and confront major challenges while creating value for all stake holders.
Once we’ve established the viability of the venture, we turned our attention to the seven key response actions my client needed to take to achieve high probability of getting the attention of serious investors.
The seven key Action Areas that we took were:
1. Created a strategic plan and a business plan. The strategic plan included the vision and mission for the new business model, along with the value proposition, and of the business’ short & long-term goals. The business plan became the operational action plan and included an executive summary, the business strategy, SWOT analysis, market research, audited financial and projections, etc. We investigated what the target investors like to see in the business plan and we customized it and tailored it to their exact needs.
2. Determined the value of the business under the new model. The value determination was based on considering innovation and marketing strategies as key factors in building the business and all other areas of the business are mere support for the operation. The business model also based on identifying what vale add the business creates for its customers? Who are they? Why they buy the product or service? How much they are willing to spend and how many times? The difference between the amount customers pay and the operating cost is considered as value creation for the stake holders
3. Built a trusted advisory team for the company by selecting legal advisors, accountants/financial advisors and business coach to build that team. The advisory team became the key resource to the business and helped develop a meaningful business plan. We guided our client through this process, and provided her with introductions to key contacts and potential investors.
4. Interviewed prospects to select an equity partner by careful planning for an interview process and used the input of the advisory team along the way. We prepared a list of questions to ask each prospective investor and did background check on all of them while helping in explore multiple revenue sources to get the best deal for our client. The overriding criteria was to find the best personal and the best business fit when selecting the equity partner, while maintaining a constructive dialogue between all parties.
5. Created an exit strategy by taking into consideration my client’s personal and business objectives and the prospect investor’s needs. The main objective here is to create a win/win situation.
6. Developed top notch investor presentation documents and coached our client on delivering a compelling pitch for her business covering technology and strategy fit for the business model.
7. Selected the right investor who chose to participate as a venture capitalist with agreed return on investment for the first three years. The selection did not happen overnight and the process was tedious and at times challenging for but we assisted and encouraged all parties to keep the faith in their abilities and the business process.
The key to our success in this instance was that we started with the end in mind, initiated all the actions to achieve the set objectives and kept the client in total self-awareness at all times, while keeping some flexibilities along the way. By deploying strategic thinking with willingness to revisit and change our strategy when deemed necessary and staying focused on the vision, mission and goals of the business delivered to our client her ultimate objective; Making her business investor attractive.