Entrepreneurial Masterclass
Chapter 5 - Investor Management

Lesson 5: Your Plan & Your Team

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Your Plan, Your Team, and Investor No-Go’s

You need a business plan for your start-up. You need a good team with the right experience and skills. And you need to know the investor “No-Go’s” before you fall into a pitfall and set yourself back.

 

Your Plan

While your purpose statement about your company drives your story about “why” your company exists and how you are going to make a positive change in the world, your business plan is the “how” you are going to achieve it. While you may not show your business plan to many people because you will mainly rely on a tight pitch deck, you still need to have your plan mapped out; it’s important for the future of your company, even if the direction of your company changes over time.

Your Team

Once you have a plan, you need your team. Can you execute on your plan? Your team answers that question. It’s not about how much money you have or need. It’s more, if you were given the money, how would you ensure that you fulfil your plan and grow your company to deliver positive returns on the investments that your investors have made in your company. You need a team with the right experience, skills, expertise, mentality, and drive.

 

Investor No-Go’s

You want to put your best foot forward.  It’s best if you avoid the following six investor “No-Go’s.”

  1. Not Being Full Time in Your Start-up
    If you don’t believe in your start-up enough to be full time running it, why should investors believe in your start-up? Not being full time at the time of asking for investment money tends to kill the deal.  Investors want to see you committed to your start-up company. They want to see you are willing to make sacrifices and take risks.

  2. Solo Founders
    Investors tend not to like a start-up with only one founder.  A start-up usually needs two or three founders.  The reason is that investors want to know that if one founder steps away from the business, the other founder(s) can keep the business going.  More than one founder reduces risk for investors, making them more likely to invest.

  3. No Experience in the Field
    Investors focus on founders and the team for early-stage companies. As such, they look at the experience of those individuals. If the founders have no experience in the start-up’s field, it’s a bad sign.  If the team under the founders have little to no experience, even worse.  Not having a solid core team with experience undermines a start-up.

  4. Not Knowing Background of an Investor
    If you walk into an investor meeting without knowing the background of the investor, you are making a big mistake.  You need to know the investor’s personality, track record, preferences, and story.  You should tailor your story to the investor’s story.  Failing to do so will make you irrelevant fast.

  5. Being Needy
    Coming across as needy to investors is a big no-no. Nothing kills a deal faster than being needy. Period.

  6. Not Knowing the Multiple
    This may be new to you, but you need to understand how multiples work in the valuation of a company. Not knowing the multiple in your industry / field will make you seem out of touch and not business-savvy. In the fintech field, for example, the multiple is 8x of revenue, but in consumer tech it is lower.