As part of my responsibilities at Global Startups, I lead seminars on mastering negotiations for companies participating in the accelerator programs. My primary focus is to emphasize the importance of building trust with your audience through effective storytelling and, crucially, understanding the nuances of your business.
I usually kick off my presentations with this 2020 quote from a General Partner at an early-stage Venture Capital firm located in a small Canadian province—“We reviewed 1,500 slide decks this year and only invested in 6 of those companies”. The quote highlights the difficulties companies face in attracting investment for business expansion, especially in today’s landscape where Venture Capital investments are becoming scarce due to prevailing interest rates.
Given the scarcity of capital, it is imperative to know that when approaching investors, they are evaluating three key aspects:
- Will they recover their investment?
- Will their investment yield satisfactory returns (known as the discount rate)?
- When will they exit your business, either through a future investment round or IPO?
It’s important to understand these crucial aspects. Notably, reputable VC firms in major Canadian hubs review approximately 50,000 slide decks annually, significantly increasing the likelihood of receiving a “no”.
Tips for Startups to Consider Before Meeting Investors
1. Embrace Bootstrapping: A valuable tip is to run and grow your business like you don’t need an investor. Investors value entrepreneurs who can bootstrap their way to success
2. Eliminate Potential Obstacles: To improve your odds of securing investment, it’s vital to take the “no” away. Provide investors with compelling reasons to say ‘yes’ and be ready to address objections. Scrutinize your business plan from the investor’s perspective, identifying and resolving any concerns they might have.
Turn a potential “no” into a “yes” by knowing your numbers – revenue, costs, and sales forecasts for the next few years. Investors gain confidence when you demonstrate a thorough understanding of your business metrics.
3. Prioritize Sales Traction: In his presentation at the Global Startups Conference 2022 titled ‘Surviving the Valley of Death‘, Diego Cibils sheds light on the need for early-stage companies to focus on sales. He explains that successful start-ups understand that sales serve as the lifeblood of any business, making it a primary focus for sustainable growth.
“Building your customer base before your investor base is key because investors are more interested in future growth than historical achievements”
In conclusion, the journey of raising capital and being accountable to shareholders is always a continuous one, as the CEO of your business. In today’s world, where capital is scarce, focusing on revenue, understanding your numbers, and effectively communicating your passion for the business enhances your chances of success.
Michael Kennedy, Board of Directors at Global Startups & Financial Advisor at CIBC