Mike Volker: Veteran technology investor
In a word: compelling. As an active angel investor, not a day passes by without someone approaching me for funding. As such, the business has to appear compelling on three fronts.
First and foremost, the person leading the business has to be outstanding and instil confidence. Superior domain knowledge is essential. I often think of Malcolm Gladwell’s book The Outliers, in which he talks about the 10,000 hours of practice that are required to become an expert. I wouldn’t want to risk open-heart surgery performed by a fresh grad. Yet, investors seem to be willing to risk their capital by investing in a rookie. To be compelling, the leader must have both the technical knowledge and the business skills to be effective. While a startup entrepreneur might not score high on both counts, he can surround himself with others that do.
Second, the opportunity must be compelling. I need to see a solid business case – a unique product that’s miles ahead of the competition, customers that can’t wait to buy it at a price that results in an above-average profit margin in that industry.
Third, the prospect of a home-run payout to investors has to be convincing. This is the part that many entrepreneurs pay little attention to. They spend most of their time trying to get investors into the company but very little time on getting them out. The exit strategy has to be clear. Saying that there will be a merger or an IPO down the road doesn’t cut it. I need to be convinced as to who, specifically, might buy the business, when and for how much. If I don’t see the prospect for a 10-times payout on my investment in less than 10 years [which is only 26%], then I’m not interested.
Kyle Vuko: CEO, Indochino
Having gone through three rounds with Indochino, I’ve learned that priming your business for investment is about crafting the simplest, most memorable way to share your story; getting people excited and bought into your vision [literally]; and finding a partner who will take your business and your development as CEO to the next level.
This process seems simple but is one of the hardest and most intensive parts of the job – with most financings taking six months and more than 100% of your time. You can get coached on how to create a pitch deck, but it’s the time requirements that come as the biggest challenge.
How can you survive? Know the following:
•Everything else you do will be mediocre. You may miss internal meetings and emails. Prep your team on what to do with your limited availability and empower them to make decisions when your attention is elsewhere.
•Plans will change. You might need to hop on a plane or take a call at any moment. That means other plans will fall through, and you need to prepare your company for that reality. Very little is as important to a cash-burning startup as fresh capital.
•You will need help. Investors will ask you for reports you don’t have – and you’ll need to rely on your team to prepare them. And like everything else, these will be last-minute requests. Create guidelines to help provide your team with priorities.
In short, no one survives a financing round alone. By getting your team involved early and telling them how to support you and the business, you will be unstoppable. This will bode well both during financing and in the growth period to follow.
Shahrzad Rafati: Founder and CEO, BroadbandTV
There are various factors that play a pivotal role in securing investment, such as industry climate, corporate growth tracks and your own needs.
There are four key business areas that need particular attention. Entrepreneurs need a laser focus on the strengths of their team, product, market knowledge and monetization model. A weakness in the mix will lessen the investment opportunity. Business leaders need to put pride aside, accept that weaknesses might exist and bring them in line before reaching out to investors. If all four areas are solid, they’re off to a good start.
Next: think big. It’s important to go after investors that can stick with the business through its growth trajectory. If there is a specific goal to enter a new geography, then go after a partner that has international expertise. If profitability is key, look at investor portfolios that boast strong profit margins in your market. It’s crucial that the investor can follow through with the level of finance required and has deep industry insight.
If you have an early-stage business and are looking for an angel round, there are plenty of decent angels in Canada. Early, local funding can be a sound approach, but the entrepreneur has to have the right connections to make it happen and then must race to build the business and show the soundness of the model. For larger rounds or institutional funds, you need to be operating and visible on a larger scale. Nailing big-name customers and marquee clientele with operations in other markets will help to put you on a higher playing field.
Reaching out to investors in the valley? Despite what they may say about location no longer being an issue, you need to show why they should invest in a company that is north of the border and not in San Mateo.
Finally, and most importantly, ensure that the cultural fit is right.
