Being an entrepreneur launching a startup was never an easy thing. But nowadays it is considerably harder. Entrepreneurs seeking funding are told they have to demonstrate traction whilst bootstrapping. They need to secure introductions in order to access Angels and VC’s whilst working day and night in their garages. And they need to make sure they protect their intellectual property whilst at the same time meet a number of investors in order to get an offer on the best terms with an investor they can work with. But don’t send an investor an NDA as at best they will think the entrepreneur naïve and at worst it will offend them.
These challenges and requirements existed two years ago. But in this new economic era, there is less capital available and investors, understandably, are more cautious. Entrepreneurs seeking funding can no longer raise investment on the basis of a plan on the back of a napkin over a meal (and yes that really did happen for some). No, there is a new standard in town. If entrepreneurs don’t meet that standard, they won’t get the funding they need.
Society doesn’t benefit when entrepreneurs fail to launch high potential startups solely because they couldn’t navigate their way through the pitching process. There will be some that say ‘well if they weren’t able to raise investment, then there was no real chance of them launching a successful business’. Sounds convincing perhaps at first blush, but the realities of being a hardworking entrepreneur sometimes mean that every ounce of energy and thought power goes into building a promising business at the expense of developing an investor connected network or perfect pitch.
The solution? Well firstly, entrepreneurs must work on developing their pitch skills and ensure that their executive summaries, decks and business plans are specific and investor focused. The consequences of not doing so were highlighted in this recent article by one entrepreneur who hadn't done the necessary preparation.
Secondly, do the research. There are some really good VC’s and Angels out there who make it crystal clear what they require from entrepreneurs approaching them for funding. They know the challenges and make it easy for entrepreneurs to understand what’s required. This information is available on their websites and some of them write great, informative blogs. They set a standard that other investors should follow. This is only a partial solution but it’s something.
Great sources of advice and information include 'Both Sides of the Table' by entrepreneur turned VC, Mark Suster @msuster , Chris Dixon's blog and Fred Wilson's 'Musings of a VC in NYC'.
