In the midst of the chaos of launching a new site, I’ve joined a fierce and loving group of female entrepreneurs at a community called One Roof (started in Melbourne and growing its reach in L.A.). I find myself now surrounded by so many talented individuals who are each capable business people, strategists, deal makers, and strong friends.
And yet they uniformly are weak in one area, and are often not even aware that they’re not aware: whatever idea they’ve grabbed onto and are making happen has never been translated into a solid financial story, so they position themselves for a high likelihood of failure if they need outside capital.
Their business does not speak the language of finance, and investors (who tend to find financial structure, language, goals, a little crucial) walk. They make excuses, push out meetings, and if they’re your friends and family, it’s just damn awkward.
Without capital, without money to fund your brilliant idea, you’re just another dreamer. I know this hurts.
I’m a big fan of dreams (and dreamers), but dreams that aren’t executed with new hard-won skills, especially in the area of finance, are pipe-dreams. Your dream remains in the category of a passionate hobby, instead of leaping into the realm of an exciting business.
Now I know many people who have been able to become very successful in business simply by deploying their talent in deal-making or coding or making art. Often times, if they don’t understand how finance works, they’ll make very basic, huge financial mistakes along the way and even during their “success,” subtly undermining the realization of their business’ full potential. Sometimes, they still make it.
As someone who has never been an entrepreneur until now, I bow down to their sheer courage and love for the project. I have a lot to learn from them. I respect them in every bone in my body.
But as someone who has grown up on the side of institutional investing and finance, my heart breaks to see most entrepreneurs struggle with not knowing that you need to make your business’ story a financial story too. You just gotta.
If you are not capable of self-funding your idea, VC’s today are less likely than ever to be a possible financing solution as they seem to be going the way of my old business, hedge funds and private equity. They’re going huge (think Uber, Slack) to move the needle in their portfolios and are simply less interested in smaller, profitable, wonderful business ideas like yours that could make the world better.
Your idea deserves investors. But you gotta give them a break. They’re people too. If you aren’t able to articulate your business in a financially coherent and exciting way, why on this God’s green earth would they want to get on board? You need to build them ramps in your decks, presentations, and show them that you have skills in building a financially strong business that they can invest in long-term.
“Creativity is a crushing chore and a glorious mystery. The work wants to be made, and it wants to be made through you.” — Elizabeth Gilbert, Big Magic
Gilbert wrote for 20 years before Eat, Pray, Love. If you can’t self-fund for that long, you and I should start engaging in the necessary chore of learning finance for your business.
Let’s begin with a kick-ass investor presentation. This will not only create a physical asset that you can use as a tool during meetings to attract money, but also force you to articulate the beauty of your idea in as few words as possible. From an investor’s point of view, your ability to do this is essential. Don’t waste their time. Think in bullets because they do and you want to be able to meet them mentally half way.
Rule 1: There is a natural order to telling a story, even a financial one. Follow the natural path.
The first page in your deck should immediately say in one or two sentences what your company does. YOUR VISION.
Not the problems you intend to solve. Not a list of your accomplishments-to-date. The first page needs to provide the answer to, “Who are we?” And that’s it!! Remember, bullets.
“Cartography Inc. is a digital map-making service that redefines how we see and interact with the world so that small-to-medium sized companies can more accurately identify potential markets and engage with lucrative but underappreciated communities in ways that were not previously possible.”
You say what you do, who your market is, and why you’re different in one slide.
The second page of the deck needs to be about The Opportunity that your company is going after in hot pursuit. Here you can talk about the target market’s current size and potential to reach a much, much bigger future market. The Opportunity slide in the deck is where you tell investors what they should be excited about, but not yet in fine detail, but in big neon copy. Learn what CAGR means (“Compound Annual Growth Rate”) and why it’s important to investors (“measure of an investment’s return over time”). Use financial terms sparingly but properly to hint that you’re no financial dummy.
Remember, even though the second page may contain a few more details, the copy on the page should still be direct and tight. No extra words.
“Traditional map-making market size: $XX, with $XX captured by its end users. Digital map-making current market size: $X, growing at XX% CAGR.”
Always keep in mind that investors care MOST ABOUT the potential growth rate of your company and less about the absolute starting point.
They want to know where you’re headed, unless you’re a hot mess already and you’ve shown it in your slides. Then your state of hot mess trumps all.
The third page should walk investors through The Problem your company is looking to solve. Give them the scope of the problem with a few numbers (when in doubt, use as accurate numbers as possible — don’t shy away from numbers on the page just because they’re not hyper-accurate or current — as long as you footnote the reference, investors get it and they’ll appreciate the detail unless they’re douchebags).
Your Problem Page should answer the how and why’s of how this Problem became a Problem and has remained a total Problem. Oh yeah, this is crucial too — you should definitely answer the question of how there is value to solving the Problem. Why there is financial value to solving it.
Every entrepreneur naturally wants to explain why we should care about a problem. The kick-ass entrepreneur tells you as an investor how there is potential financial gold to doing good in this way as well.