So, what does it actually take to successfully secure professional-grade funding for your startup or business?
Believe it or not, it has nothing at all to do with your “billion-dollar idea.”
Ideas have absolutely no value to professional investors. An idea is meaningless without a team, traction and a real product.
Let’s start with your team. The solo entrepreneur is almost never funded. Why? He simply does not have all the requisite skills necessary to deliver successfully.
Investors fund people, not ideas. Better put, investors fund experienced people who have proven they can successfully execute. Why? Unexecuted ideas, no matter how valuable you might think they are, are absolutely worthless.
Put an A-plus team together that has all those skills collectively. You will have to dilute your equity ownership doing so, but don’t just give equity out to team members. Establish a vesting schedule based on the achievement of milestones that move the equity from “promised” to a team member, to owned by a team member. Always remember, at the end of the day, the solo entrepreneur owns 100% of nothing. Your team builds value.
Most startups don’t understand what investors mean by traction. Investors couldn’t care less about how many Facebook likes you have. Investors couldn’t care less about how many people follow you on Twitter. Investors couldn’t care less about how many unique visitors landed on your website. Investors couldn’t care less about the glowing article published by your local business journal.
What investors care about is how many prospects you have “walked to the cash register.” It’s all about customer conversion. Nothing validates the efficacy of an idea like someone willing to pay cold, hard cash to acquire the solution.
The sole role of the startup CEO is to acquire actual, paid sales, not Beta customers using a free version. Actual customers pay cold, hard cash.
If that is not your strength as a founder and CEO, make absolutely sure that customer conversion is the strength of one of the first team members you bring on board.
World-class products are not built in corporate boardrooms. They are built in customer living rooms. Talk to your customers before you build anything. Talk to a lot of them. Talk to a diverse group of them. Talk to them constantly.
Build a Minimally Viable Product (MVP) based on those conversations. Give the MVP out to a diverse group of users. Let them test it. Let them “de-bug” it. Let them beat it up. Let them suggest improvements.
Take all those data points and build them into your first official release version. But remember, your first release is just your first release. Stay close to your users. Listen carefully to what they are saying. Add all that data to your second release, then your third release. Your product can never remain static if you want continued success.
Accomplishing all of this is not as expensive as most believe. A lot of it can be accomplished by a dedicated team working not for a salary initially, but for the equity promised if milestones are achieved.
At some point, cash will be needed, but forget about that cash coming from professional investors at such an early stage. It won’t. That’s what the “friends and family” round is for. And, hopefully, you have friends and family who believe in you, and your idea, as much as you do.
Got a “billion-dollar” idea? I’d love to talk to you about it.
Copyright 2019 The Business Journal, Youngstown, Ohio.
Published by The Business Journal, Youngstown, Ohio.
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