Attracting investments is a powerful tool for scaling a business, but it is not suitable for everyone and not always. Before knocking on the door of investors, it is important to honestly assess the readiness of yFigucadu. Haste can not only lead to refusal, but also harm your reputation and future prospects.
This is a fairly large flow of requests, at least 10-15 applications daily. This includes those who want to find an investor who will pay a lump sum fee for a "beginner" under the franchise, as well as those who decided to open a coffee shop / beauty salon / kindergarten, came up with a new marketplace, super-app, etc., but do not have a ruble to invest in the business themselves.
What can be advised here. First, you need to realize that an investor is not a philanthropist, not a charity organization and not a sponsor. And he invests money in the project only when he understands that the probability of making money for him in this project is high. And it is high, as a rule, in two cases:
1. When the project is already working and showing good profit.
2. When the project is done by an experienced entrepreneur who has successfully launched and sold more than one business.
Giving money so that you can practice entrepreneurship at someone else's expense is not interesting to anyone. Money is too expensive now, and the time of an inexperienced businessman is, on the contrary, cheap, this is not a proportionate investment.
1. Go for money to your close circle, who knows you and believes in you, and will be ready to finance your ideas.
2. Look for support programs for beginning entrepreneurs in your city, most likely, you will be able to find a grant for several hundred thousand rubles, so that at least something starts.
And yes, an investment broker won’t help you here, he simply doesn’t have time to work with ideas, since he needs to sell real assets.
So, the investor wants to make money. And he always has at least several options where he is offered to invest, and professional investors, whom we call smart money, have not just several, but dozens and hundreds of options. So, if you come to an investor without clear and transparent calculations, but with a bunch of sloppy Excel files that you need to sort through for many hours to understand at least something, the investor will not waste his time on you. After all, such tables also show your approach to business as a whole - if you have a "mess" in planning, then most likely the same is true in everything else.
The other extreme is super-primitive calculations with fantasy numbers. Yes, the financial model is understandable because it is very brief, literally one or two tables, in which:
figures for future revenue are “blown out of thin air”,
there is no connection between revenue and unit economics and the hiring plan,
taxes are calculated at some fictitious rate,
the final marginality is 70% (while the average for this niche, for example, is 20-30% maximum).
What will such a plan tell the investor? That's right - that the founder does not understand anything about the business he has taken on and wants to attract other people's money to. Just put yourself in the investor's shoes - would you give money to such a founder?
Understand the financial model of your project.
Calculate the actual figures and, based on them, build a high-quality financial forecast, where you can explain the source of each figure, where there will be realistic indicators, not fantasies, and where it will be transparently substantiated and confirmed by calculations:
— how much money needs to be raised now and for what expense items,
— what conditions we offer the investor for this money and what is the projected profitability for him.
If you do not know how to do it yourself, come to us, we develop a financial model of business and conduct intensive courses on attracting investments in startups and business.
A typical request from such an entrepreneur: “I already have 10 million in annual revenue, I want to grow, I am ready to sell 10% of the company for 100 million! Why such an assessment? I feel it.”
Here we once again recall the main goal of the investor. When entering a micro- or small business at an assessment, say, of 1 billion and to receive a normal return, he needs the business to grow to an assessment of at least 10 billion in three years. And also for someone to be found who is ready to buy out his share at such a price. Because the assessment on paper is just a number, it is worth nothing until the investor signs a real deal at this price and receives money into the account.
Or the business must start generating profit so that the investor receives dividends of at least 20 million per year. And preferably as quickly as possible - so that inflation does not eat up all the profitability.
Will our entrepreneur be able to actually lead the company to such results? The probability is extremely low - most likely, he will simply "choke" in business processes, because running a business for 10 million, 100 million and a billion requires completely different competencies and processes.
Investors understand everything perfectly well, so they do not go into projects with inadequate valuation. And everyone remains with their own: an entrepreneur with a business for 10 million, an investor - with money that he invests in more adequate founders.
What is the main advice that can be given to this group? Move step by step. You do not need to immediately try to "squeeze" the investor with an inflated valuation. You will not squeeze out a smart investor anyway, and with the rest, you will have a lot of problems later.
Move step by step. First, we attract the first tranche at a valuation appropriate to the scale of the business. We show results both in money and in our ability to manage a small amount of investment. We test the main hypotheses, discard the untenable ones, and focus on the most effective ones. We prove to investors that you can and should be trusted with larger checks. And we attract the next tranche - which is very important - at a higher valuation, because the project has shown new results and reached a new level.
And there is also a fourth (very rare) group of projects. These are entrepreneurs who have everything in order in their numbers, they understand their optimization and growth points, and have developed a clear and logical scaling plan. Their business is an asset that combines a client base, a quality product, an excellent team, organically growing revenue and profit. There will always be demand for such projects among investors, and what's more, investors will compete with each other for the right to invest in it.
The article's balanced discussion of different asset classes and investment philosophies provides valuable guidance on creating a personalized investment portfolio.
Well-written and thoroughly researched, this article sheds light on new trends in finance and provides actionable advice on optimizing investment returns.
Finally found useful information for myself in the field of financial activities. Thanks to the author for a brief overview of an important topic for me and would like to receive a little more detailed information.
113 Harbor Town Square, Memphis, TN 38103
+1 (901) 528-9210
contact@figucadu.de