I used to enjoy watching Dragon’s Den on Tuesday evenings. I learnt quite a bit from the show. The Dragons sometimes seemed hostile, mean, imposing and difficult. Do I blame them? Not at all, they have to make sure they are giving their money to the right people. In his best seller ‘The Art of the Start’, Guy Kawasaki shares pearls of wisdom for entrepreneurs who want to endear themselves to funders. Read on.
Start with a great story:
Here is where the market is today, here is where it will be tomorrow, here is how I have anticipated those changes in the market and will capitalise on them. Capture their imagination with something unique and compelling.
Check this out. SBK Recycling is a real recycling company that I am assisting to get startup funding. This is its story.
‘Markets and uses for recycled plastics are rapidly expanding. The industry is robust and healthy and shows a vibrant and growing industry as shown by the results of a recent survey. More than 210 plastic recyclers were active during 2012. A 9.3 % increase (268 548 tons) in the amount of plastic recycled was recorded. The total tonnage of plastics waste diverted from landfill equates to 20.7 % of all plastics manufactured in 2012. The local recycling rate was 19.6% compared to international standards of 26.3 %, which means there is a lot of head room for plastics recycling, too much plastic is going to waste. Among the drivers of the growth of the plastics recycling industry is the increasing use of recycled content in products as environmental awareness increases. Corporates are instructing their plastics product manufacturers to source recyclate so that their products contain recycled content thus contributing to a greener world. My company is taking advantage of these trends and while starting at a low level in the value chain, it will gradually graduate to the production of recycled goods in the long term’.
Sell the opportunity to funders.
Explain the opportunity you are going for.
For the plastics recycling company, this is how it explains the opportunity.
‘We are a plastics recycling company. We have identified a gap in the market for clean plastics which are used as inputs for the production of plastic pellets. There is presently a huge shortage of recycled plastic pellets. It is this gap that we are pursuing’.
Define the value you are creating to capture the opportunity?
What does your company do?
And don’t just tell them what you do, tell them what you do better than anyone else.
‘We buy plastic scrap, sort, wash and bale the product using world class technologies to produce clean plastics. This an important requirement by pelletising company who use the product to manufacture quality pellets which are ultimately converted to final products’.
Be clear and brief
Funders and investors are busy people.
You need to cut to the chase so that they figure out quickly what your business does, how you generate money, what you require from them and how much money you need.
‘We require R3 million to buy the wash plant. We will contribute R300 000 as own investment’.
Tell them about the future that you are building, tell them where the business is going.
These are goals that are SMART: specific, measurable, achievable, realistic and time bound.
‘The company wants to build its brand as a major plastics recycling company in the region processing up to 2 880 tons of plastics annually’.
What is the ‘magic sauce’ that your business has that gives it a credible competitive advantage?
It could be the unique skills you have, the team you have built, a patented technology, secure markets tht competitors cannot get access you, it could be the processes you have put in the business that enable you to deliver quality work on time, it could also be short turnaround times.
What is that something in your product that cannot easily be bought or copied?
Funders and investors invest in people.
Sell yourself and the team. Who are you and why are you the best team for the job? Your team will make or break the deal. Show investors you have a capable team with skills that complement each other.
Investors love traction.
If you can show them that your product or service has a market, even on a small scale, you are surely on your way to winning their hearts. An untested business concept scares funders.
Know your investors.
Investors have preferences. They have causes they care for, and they have views on issues such as gender equity, development impact and the environment. It helps to know these preferences before hand.
Know your numbers.
How many products do you expect to sell, at what price, what is your profit mark up, what are your key costs, what is your expected net profit and how many products must you sell to cover all your costs?
Funders need to know who else is in the market.
Who are your competitors, what is it that they are good at and you are not.
What are you good at, and they are not? Be open about your weaknesses and show how you are going to reduce their impact on the business.
Most importantly, practice your pitch. Find someone to listen to your pitch and to give you feedback.