The Science Of Raising Money As An Entrepreneur

we're going to do two things today I'm gonna talk a little bit about the stages of investment and how you fit into there so you have a Google maps of kind of knowing where you are and knowing how investors look at you and then I'm going to take you through the pitch deck and Pitch stack is more than just reaching out for investment so I'm going to cover those two things and see if I can actually use a piece of technology here so let's go through the Five Points first of all the business life cycle we're going to take you through so you know where you are because some of you understand but maybe you don't know how investors and others look at you and maybe how a bank would look at you then seeking investment know why and when to get it the investors know the animals that are out there in the investment jungle and which animals you should be talking to at which time and which to avoid then the uses of capital know what is and what isn't bankable and how they look at you as you try to raise capital and finally the meat and potatoes of this presentation today which is I love is the pitch deck taking you through the three tools which is your elevator pitch that you make in two minutes some of you are really good at doing that I've seen some of them today some of you are a little longer and you can be concise and even more powerful with the story that you're so passionate about and then the deck itself and I'm going to show you you can present yourself in 15 slides to your bank to someone you're recruiting or to potential investors let's jump in the life cycle the key to running a company and then communicating with these constituents is really knowing where you are this is the Google map of where your company is your company is somewhere on this chart you could be a startup and you're down here in the valley of death where you've been trying and trying and trying you had an idea you've burned through some money and it's just not working and you need to just go on to the next one Thomas Edison said I didn't fail a hundred times making the light bulb I failed a hundred times making a light bulb right I found 100 ways not to make a light bulb well he ultimately succeeded but sometimes you give it up that's the valley of death but you're more experienced for your next run you finally go up to from that's where seed and startup in early stage are you ultimately break Break Even there's an exit there sometimes there's early exits where someone knocks in the door hey we love what you're doing it's very very early and we're gonna go take it if anybody knows the history of YouTube you know that they sold very early for what everybody thought was an insane number to Google had they waited some years later it would have been 10 10x at nonetheless it was an early stage and they said okay we'll do it then you finally come up to your truly established company next exits usually happen up there where it's repeatable where somebody maybe in your ecosystem says hey you're doing it you're doing it right you're repeating it you've really got something going on here you know what I think we want to add you to what you're doing could be a competitor could be another company that wants to add you to make what they do more powerful you know you make peanut butter they make chocolate together you make Reese's Peanut Butter Cups some combination like that finally you get to the high growth many of you in here are there where you're talking about the pain points of high growth and that's why you're at sales Leadership Summit that's why you're a business planning workshop that's why you're in there and there are pages in this book already that you got these Stars next to because you're trying to eliminate those pain points and drive it even higher you may exit by reaching a certain point and selling to a competitor across town but at that and finally the home runs where you get out there to late stage and then at 65 or some time you decide to do it but this is the Google Map your company is somewhere on this and knowing where you are and how to talk about the stages with investors is important then we get to seeking investing know why and when what's really interesting is I hear some of you saying Hey I want to go out and raise Capital what do you need to do well we really don't pay ourselves you know the full amount right now uh we've been you know kind of ramen and pizza and Red Bull at midnight and I says wait a minute so the costs that you show when you make your little Financial is not the real cost of your business well it's all we can afford I get that but if you were paying natural costs you'd actually still be losing money but you're prudently not spending that because you don't have it to spend okay well when you talk to investors it's not that you need money to right-size your cost it's that you haven't scaled to get to the size where you can afford the natural cost of the business it's understanding how to convey all that it starts at the seed stage hey we're Founders I got a business plan we have a little p l we have our MVP minimum viable product and we have a go to market plan and I put some of my own money in it and I'm just looking for 200 or 500 to go to the next base check startup phase you're a backable CEO because your idea is working and you've got some traction and you've got a few people that have joined you your early management team you have a beta product that's actually in the market and you've got a few customers you have some revenue and so you're at what we would call a series a point actually trying to raise money to then go to the next Milestone repeatable now you're in business you didn't just have a few first customers you got more more doing the same thing the same way hiring another sales person training them the same way and going and you're off and running many of you that go to the sales Leadership Summit have talked about wow I'm glad I came here because it really showed me how to build my sales team for Success at this repeatable stage and you've got a team that's got a little bench and you've got your product roadmap you're adding customers maybe you've gotten several million dollars now in sales and you'd be what we would call like a series B level and finally growth and growth can go on for 15 years Pat was almost eight years in business before we got the expansion capital for PHP and he said hey I'm making profits it's a very profitable business but I want to build this into a truly technology enabled Insurance distribution agency of the future to do that I'm going to double down on technology I've got all these Millennials selling for me they expect everything to be on mobile I need to be ahead of the game I can't wait for the industry I need to do this see how that works what a wonderful story for expansion capital and he got it including someone named Oscar De La Hoya that joined in because I love that you're reaching out to the Hispanic community so you become a magnet for the investment there the investment kind of helps to find you because you've got a good story and it is harder to find great companies to invest in than it is to find money now all of us that have started companies like me will tell you it's the opposite it just seems painfully hard to find money well sometimes that's true then we get two investors know who you should engage this is really interesting people come up and say hey a friend introduced me to a private Equity guy and I want to talk to him about raising money but this doc how should I talk about it tell me about your company one and a half years old three of my friends and I just graduated Syracuse University I might hang on a second what what kind of sales do you have we have about half a million in sales we've done believe it or not well if you're talking to a private Equity guy I think you're talking to the wrong person now think about it if you knew a friend that was a doctor and you had something wrong with you wouldn't you say to them what kind of doctor is it I said well what's wrong with you well I went skiing and I've either got a strain or a tear in my knee I took a bad fall on snowboard that's it and he says your cousin's a doctor right can I go see him we just not what you would say he said what kind of a cousin is your doctor he's a gynecologist okay probably not the one to go see from my knee so you we have these time in life we do that but if someone's got money and you've got an early stage you know company it's like watching football fumble jump on the ball that guy's got money well but you're out of sequence do you see what I mean so who was the first investor in your business you and you will continue to be that if you haven't put some skin in the game even 25 Grand that you scrape together because you gave up every subscription you have you gave a cable you did everything you could and you saved it that's meaningful to First Investors you have some cash use saved and you put skin in the game so it's you then there's fnf that stands for friends and family and it really should be friends and family that have money to lose because you're asking him to make a single high-risk investment in an early stage on Startup meaning you but they've got love relationship and Trust that's built in so you got to protect each other when you do friends and family they're going to come back to you and ask hey when is that business going to be profitable so you can give me some of the money back because your niece that's her College money you're like whoops make sure it's money to lose that there's understanding there finally there's angels angels are investors are usually independent that come in during that stage and then you get to VCS after you've crossed out of here the valley of death and so who's most responsible for the Valley of Death you you have to walk over the hot coals and make your successes and get to your points like every other startup has had to do then you get to VCS who can carry you along for many different phases and then CBC that stands for corporate Venture Capital Google has a group called G Ventures that is Corporate venture capital and they invest just like an investor would but it's corporate and maybe you get some benefits of working with Google maybe you don't but it's their own investment so it's similar to venture capital the venture capital is usually agnostic corporate Venture Capital within companies finally way over here you get PE firms PE firms are usually exit investors or people that want to pay you for a majority of your business and be careful it may also come with you sticking around for three years and getting a new boss and finding out you're being rolled up and merged with other things but PE firms use the exit investors so when I gave the example of the three guys from Syracuse get it I'm saying wait a minute so you know somebody PE guy well unless maybe one of the gentlemen or women at the PE firm is an independent investor in startups and might be doing that personally okay different story you see that makes them an angel so you have to be in sequence where you're going to do it and finally strategics those are large companies in your industry that may invest in you and that would be Google putting Google money not g Ventures but Google money in to be maybe 50 of your business and then buy the other fifty percent later and by the way if you ever looked it up be astonished at the number of uh Acquisitions Googles does they they acquire like three small companies a week they're not all headlines and by the way so does IBM so does people like Oracle it's really amazing so know the investor landscape well gosh Biz doc how do I find this out look at their web page they will tell you what stage they invest they will tell you what sectors they invest in they will tell you their check size and whether they make minority Investments early on or they make a majority investment like a PE firm want to own you later here's a quick website from TCP they're in Dallas Texas I just found it because I thought it was so nicely laid out this is our investment criteria we happen to like to invest in Texas so we can keep an eye on the things we invest in we are specialty management buyouts if you have a partner that wants to leave or an idiot brother you'd like to buy out there are those then that's what we do and we have deep experience in health care services and SAS software so if you're not any of this don't call them but if this is who you are you're like wow they're going to be very interested in speaking to me so it's usually easy to find the harmony if you just kind of look you look long enough okay now the use of capital what isn't isn't bankable investors invest in only three things people product and time in that order people is that you are a bankable CEO and you've got a team around you and a product that's working in the market or you need time so when you think about that people say what do you use the money for I need to get a CTO expand my Tech Team invest for a year so that the next version of my software that I built with Engineers as an MVP will be ready got it so you're building this to go scale and that's what you're using the investment to yes time product and people in some combination I hope that makes sense because many of you talk about I need to hire five more sales people okay well wouldn't sales people pay for themselves by selling something well the first three kind of our kind of art but I need more it's like wait a minute then you need to really get your sales you know together there is a great example that came recently and some of you may be in this room so I won't name the company name and they were like hey we need some investment capital and some advice on how to do it because we want to buy a small competitor that's got a really good sales force and a really good customer list and together we think we do fantastic in this industry wonderful why do you want to buy sales people if you've got the better product then optimize your sales organization and we begin to talk about it and ask some probing questions and are like you know what you're right I'm thinking about this wrong and what if you bought that other company and those sales people didn't like you they really wanted their mommy their their old boss and she was wonderful and they loved her and then they slowly leave the company after you buy it well now you went out got all this money bought this company merging them together like The Brady Bunch didn't quite work and some of the children left home that's a disaster instead they sat back and looked at it and said you know you're right what we need to invest in is optimizing our sales team so often looking through the use of capital kind of tests your assumptions about what you're doing with the business and how you're investing in it okay let's get to the fun stuff pitching three tools a great presentation of your company and two scrubs a clear and concise elevator pitch that's your hook you quickly concisely with enthusiasm explain people the problem you're solving what you're doing 10 to 15 slides concise and then a nice verbal narrative that goes along with the slides because generally speaking you've thought ahead and sent the presentation in the same language that the person speaks so you don't call them and read it to them I've had folks that we do zooms and are just reading this to me and I said hey you sent it to me a day ago I read it on each slide here fill in the blanks for me I want to hear your heart I want to hear your passion I want to hear the story behind the story I can read the slide so the elevator pitch why is it important to have it forces you to focus and some of the things that you've seen here already here at vault is communication and focus you know six ways to focus six ways to hold accountability things like that you need to put that to yourself too focusing and it also doesn't require The Listener to overly focus and try to decode because you're focused and they can just hear what you're doing and it calls them the answer and in your elevator pitch you cover your problem differentiator Your solution some numbers organizing your thoughts have you met a person where you said hey maybe you met him in the hallway here you said Hey I'm tell me about your business and 10 minutes later you really have to go to the bathroom because you've been delaying that and you still don't understand have you been through that I've been through situations after 20 minutes the beer is warm the pizza's cold and I still don't understand the core differentiators of their business but I'm sitting there being polite and listening how many people have done that I did that early on have you ever done that to somebody okay it's a Rite of Passage so great pitches read all over your pitches answer this question why why did you do this why is it interesting the customer why are they buying and the right story with the right examples will get the investors excited along the way in doing that know those differentiators people say why why isn't bent invented yet why you why today you know why didn't doordash do it what customers love about you the most do you know let's play a game called name that company okay I'm gonna give you I'm reciting pretty much from memory because I've read it over and over an actual this is an actual elevator pitch that a company did I think in its 2008 maybe 2009. are you ready okay hope you're not asleep it says hi my name is Brian do you have a minute yeah okay um this will only take me two minutes I promise I notice you're here at the um conference and your badge says investor you invest in early stage companies yes I do may I take two minutes yes but make it two minutes I need to step aside make a call before we go back in great I'm in the hospitality space my partners and I believe that we have a solution that brings two needed things together there's a company called Couchsurfing that did a survey that found that 30 percent of Americans would be willing to run out of room of their house or their house itself for a day or two when they're out of town it's also been found that you have for people 25 to 40 the the most difficult challenging budget for any trip is usually the lodging airfares usually can get something cheap but the lodging is usually the most expensive part and the most difficult part when you're trying to put a trip together well guess what we helped get these two sides together we've made what is basically an eBay where someone could put their house up for two days of rental and someone could find that we make 15 in the middle that's our business before you think I'm crazy we've already done three thousand nights in six months here in San Francisco so we think it's working I appreciate you listening could we trade phone numbers maybe I talk to you sometime about it name that company exactly right you see that research showed we have done three thousand nights we make money 15 in the middle so if you're an investor you're like well you know what this is sort of a service product so an Airbnb for hotels yeah you know what let's talk get it any company can boil it down anyone can boil it down so then you get to the pitch deck itself the story in detail because now they've agreed to give you a meeting fantastic you want them to be hooked you want the the that elevator pitch to be so clear they can't ignore it they're like wow that was really interesting and what did you also just teach them about yourself you can answer the question with passion quickly and beautifully and now they're thinking about how you might talk to customers win customers talk to your team there's a lot of evaluation that goes on in that two minutes well I really haven't talked about this you dance around a little bit now you're a dancing CEO you don't want that you want that first date to be sharp you know they have one chance to make that impression so let's go through the pitch deck and say Tom how is it that I can get all this into 15 slides I can't let me tell you I've seen decks people say let me send you a deck on my company or a quick deck and I get 45 pages the entire white board in your office doesn't have to end up on PowerPoint how many have done that to somebody if you got any feedback on that that says my gosh what have you sent me here this is all you need section one is problem solution and timing four slides what is the problem you're solving why does the customer think it's a problem why do you think it's a problem for the customer what's the magic that you're solving Airbnb problem it's expensive to have a short-term trip maybe just to see a ball game lodging is expensive maybe I could just stay at somebody's condo for two nights for less than what the Marriott Courtyard will cost me bingo what's the magic it's an app it's easy you could find that house quickly what makes it special we only take 15 in the middle so we're making money on it then the business model how you make money wholesale play selling subscriptions and then why do it now so what's the problem what's your magic what's your business model how you make money and why do it now problem section timing that's all you need then you go into okay are there enough dogs to eat your dog food what Market are you serving how many people are there is that number growing you know well we're you know we sell things to Young mothers okay that Market's growing what's your competition competition is funny how many people got in business and at first thought that maybe had no company we're so different we have no competition come on there you go okay honesty prevails yep we did it too jammed that mobile we made games for mobile phone we boldly went into some of the largest Venture capitalists in Silicon Valley and on the competition side we said we compete with boredom they reacted just like that they're like okay okay guys yeah you do have a competitor you just don't realize it it's the Game Boy that's in the backpack and you're talking phones so you can't be clever with it you have to be honest about what the competition is yes there will always be competition and who are they then the timeline what is your history what traction do you have what Milestones you copied I got my friend from college to join me I got two Engineers have been with me we've got three thousand nights we've already sold here in San Francisco um Market competition timeline finally who's running this are you making money and what are you asking for here's my team here's the details of the people that have joined us we got a good little team now here's the results we have to date meager they may be we're losing money at the moment but at the end of six months we won't be but here's our financial results and finally here's the ask here's how much we'll need and here's how long we think it's going to last because we're raising money now then we're going to raise money here and then we're going to be Off to the Races or we think this is the only money we'll raise we'll break even here and then we're off to the races this is it that's the whole deck and it packs into 10 to 15 slides at most and then the narrative you don't read the deck on every slide you passionately make a point and add it so they can see your passion feel your drive see how you think use the opportunity to let them read your deck and then you add the color so that they get the feeling for you as a person from end to end and stay within your personality I've had some really fun Zooms for the person on the other end was performing their presentation not making a presentation do you understand what I mean like they've done it this way they watch Steve Jobs or they watch a video over here with the guys from Google or something and they're really kind of Performing and it's kind of fake you know you can fake it and try to be Steve Jobs or Elizabeth Holmes remember she tried to be like Steve Jobs the throttle scroll and now she's going to jail don't fake it because if somebody tries to fake it it's almost like Elvis singing Nirvana you're listening to it and it makes no sense right you'll come as you are as you were as I want you to be you're listening like wait wait wait wait wait wait what was that my brain is so confused you know what that's what you're gonna do to your listeners that's exactly what you're going to do be yourself let your style come out let your passion come out let everything come out so you know I may only raise money once why do I need to have a pitch deck I'll tell you why your pitch deck is part of your strategic planning process because it always helps you focus second it helps you recruit key team members and it's not just when you're starting five years into it your critical person may be a VP of sales and you're this big and they're at a company this big and you're trying to get them to jump how many people have had the issue of trying to get a person you absolutely want to have your company jump yeah look at that a lot of you how do I get them to come here it's part of it speaking to friends and family whether you're raising money or just communicating what you're doing especially if that happens to be your spouse and she says I just don't know what you're doing or he's like I don't understand what it is you're up to engaging a bank you'll go to a bank for a credit line asset based financing they need to hear it and you come in there and they're evaluating you and they're going to look at your numbers sure but they're also going to be underwriting who they think you are as a Dependable leader to deliver the outcome and then of course speaking to investors and also when it's time to sell the business when you sell the business the always the first answer is I don't need to sell the business I could continue because here's what we're doing here's where I'm going and by the way let me let me show I'll give you my 15 page that I'll explain it I know where I'm going I know what my next next moves are if you want to buy it maybe we talk but always have it because the best position if someone's coming to buy your business is being able to say no we'll keep driving thanks appreciate you coming appreciate this so your pitch deck should be part of your strategic planning process you always know it check your compass stock and it will infect all of the people in your organization because they know where you're going it's part of the compass that you're setting along with your culture your accountability and what you will and won't accept at the business so here's my keys for Success on this know your differentiators that's number one for me know why you're in business know why people love you know the truth of all that and have a and elevator pitch sorry for the word but haven't that down for you speak to anybody people here people you're trying to recruit the whole list I've given you then that crisp pitch deck it's part of your strategic plan and your compass and a compelling narrative that goes along with the pitch deck what's very interesting and you should do this go take a look at some of the presentations Steve Jobs made where there was only a chart or an image on this on the on the screen and he just narrated through it it's one of the best examples I've ever seen of really emotionally tying to an audience and putting it together now don't try to be Steve Jobs but look at the example of how the spoken word compelled you and the graphic and the chart backed it up so I hope I've left you better than I found you with this and this is what valuetainment is here to do also leave you that better than you found you everything we do aligns with that whether it's the monthly Mastermind webinar Elite masterminds one-on-ones with Pat himself sales Leadership Summit The Vault here business planning online digital courses business strategy sales system art of public speaking we've got these resources here to equip you and part of this presentation was to kind of underline where and how you can be so much better equipped you know preparing to look for investors or even if you're never looking for investors preparing someday to acquire a competitor or to sell your business I assume that's everybody's plan at some point and I have a course that mirrors this called pitch deck PhD that walks you all the way through so with those we have a little time for Q a and I think that's where we're going to go now but my name is Tom Ellsworth the biz Doc and on the core part of this presentation I hope I left you better than anything Make some noise [Music]

Channel: Valuetainment

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Keywords: Entrepreneur, Entrepreneurs, Entrepreneurship, Entrepreneur Motivation, Entrepreneur Advice, Startup Entrepreneurs, valuetainment, patrick bet david, Valuetainment Media, Patrick Bet-David Valuetainment

Id: SfCKm50okEs

Length: 30min 4sec (1804 seconds)

Published: Fri Nov 04 2022