journey that started out as an email to Startupnation.com and a friendly
suggestion by Joel, the Startupnation Chief Community Officer, to enter my
Elevator Pitch has continued with a day in
ON THE AIR AT THE STARTUPNATION RADIO STUDIOS
Even before the trip began, the Startupnation family (after having met many of them now, I think it’s absolutely the right word to use) had been so friendly and welcoming. After kindly helping me with the logistics and scheduling Alison, the Startupnation Radio producer, suggested that we start the day by having me stop by the recording studio in the morning to see Jeff and Rich ‘in action’ as they record another episode of the Startupnation Radio show. I’m so glad that she did!
What started out as a ‘behind-the-scenes’ look at the radio show ended up with me joining Jeff and Rich on an episode of Startupnation Radio to share my thoughts on another entrepreneurs radio pitch. How ironic is that! I’m clearly not qualified not to critique anyone’s pitch since I’m still learning from Jeff and Rich, but it was nice to share my thoughts on the air about the callers elevator pitch just like I would if I was a friend or peer.
It was my first time in a radio studio and I have to admit that was a bit nervous. What helped a great deal was the fact everyone in the Startupnation family me feel so comfortable. The professionalism of the radio team, Eric and Joan, is amazing as well. To watch them ebb and flow with the second to second changes and instantaneous decisions that were made during the show was exciting. They say that experience can make something that is difficult looks so easy. We’ll that’s how things are run here. The radio program from home sounds so smooth, but behind the scenes I now know that there is a lot that goes on to make it all happen that way.
What a thrill to be there!
WHAT IS JEFF AND RICH REALLY LIKE IN PERSON?
I think it is only natural to wonder if people are the same in person. From the very moment I met them, I have to say that Jeff and Rich are exactly the same people that you hear on the air or read online and much, much more!
In fact, the minute they walked into the studio there was a sense of energy about them that was pretty infectious to the team and myself as well. There was a distinct sense that it was time to have fun while getting down to businesses. In some ways, because they are so much like the people on the air I felt like I knew them already even though it really only had been a total of minutes that we’d had talked on the air.
Meeting them was one thing, but watching them work was another. Behind their ever friendly and humorous nature, there is a strong drive and passion for what they are doing with everything they say and do. I was truly amazed at how focused and efficient they were while still being very casual. Neither of them misses a single beat and seeing them do the radio show while juggling multiple thoughts and tasks in person, it is very clear how they have achieved the level of success that they have.
MEET THE FAMILY AT STARTUPNATION-VILLE
After lunch, we headed back to the Startupnation headquarters (what Rich called, ‘Startupnation-ville’). It is a beautiful modern, yet cozy office where all the magic happens. The one person that I definitely wanted to say hello to was Joel since he’s the one that started this whole journey for me. Joel was as awesome and friendly as I imagined.
In fact, the more people I met at Startupnation the more I saw that the entire family is sincere in their passion to improve lives by helping create entrepreneurs.
ONE-ON-ONE CONSULTATION WITH JEFF AND RICH
The day continued with the consultation with Jeff and Rich in their board room. Understanding their busy schedules I was grateful for their time.
Their experience immediately showed as we walked through key areas that I am trying to learning about. Specifically, I was seeking guidance in regards to company valuations, raising capital, and hiring a management team. Again, the Sloan brothers were amazing.
As they asked me questions and dissected my business, the image that immediately came to my mind was these awesome icebergs. You know how you typically only see a little bit of the iceberg when in fact there’s all this mass below it. Well, both Jeff and Rich are icebergs of knowledge and experience. They do a great job of addressing the fundamentals of becoming an entrepreneur, but in addition to this they have a vast amount of additional knowledge that is not seen by everyone. I was in awe. In my experience in business, I typically find that people with this level of knowledge simply don’t want to spend the time to explain things to you. I think this big is part of the amazing gift that Jeff and Rich are providing entrepreneurs across the nation. They give us their time with the goal of providing the information that will make our businesses and our lives better. The simple reality of it is that they don’t have to do this. With all their success, they could be sipping cocktails on a beach. But they don’t. And they choose instead to spend many long hours and making many sacrifices to give us the information we need to have a shot at becoming the entrepreneur that we dream to be.
As a way to share with you some of what I learned during my consultation with Jeff and Rich, I’m going to summarize the guidance that I received below. Using bullet points, I will briefly describe my company’s current situation, what I learned from Jeff and Rich, and what I will do next. These are obviously my takes of the advice that Jeff and Rich shared with me and there may be some need for additional guidance from them about some of the ideas listed. But as in all things shared, I hope that this may be helpful.
My company’s situation:
- I am in the process of seeking angel investment of $500K - $1M in exchange for equity.
- We took over two years to create an internationally award winning shochu that we’ve just begun to sell to a list of a few select retailers in San Francisco to prove the concept of the business to ourselves before pursuing investors.
- We need this capital to purchase additional inventory, hire management, and market and distribute the product in 5 key metropolitan areas in the U.S before going to other metropolitan cities in the world.
- I was planning to close the deal on a smaller amount of capital (lower than my goal requires) from friends and family to begin.
- I have an industry experienced brand manager ready to be hired once the capital is acquired.
Things that learned from my consultation from Jeff and Rich:
- Compile as much validation as possible to show to investors that your business will be successful: Use `sell through` numbers, a purchase order, vendor testimonials, customer feedback, etc. The more validation you can provide, the more comfortable and investor will be to invest. Be creative in how you can validate your business. Investors prefer to invest in something that is already growing rather than something that will grow so the more validation you provide the better. You want to be able to say something ‘irresistible’ to investors about your company.
- Keep investment rounds to as few as possible: If it is at all possible, raise all of your capital in one round. Or raise it in as few rounds as possible. Be sure that this amount you raise will cover your business to the point of being cash flow positive.
- Provide detailed business plans: An investor summary will get them interested, but an investor will not invest without a detailed cost break down by quarter in order to show that you do actually have a plan, you have thought out the plan in detail, and that there is something that the investor can use as a milestone tracker over the life of the business. Provide a synopsis of the use of proceeds along with milestones to allow investors to be comfortable that every dollar is not wasted. Also, show when the actual cash flow positive date will be and how much money it will take for you to get there.
- Have management ready to go: This is true especially if you don’t have the specific industry experience of the business that you are in. Being able to tell investors that you have an experienced team ready to go when the investment is made can make the difference. ‘Ready to go’ can mean that they are ready to be hired once the capital is available to be used. You don’t have to necessarily hire them yet.
- Spend your time with the right type of investors: Friends and family can be a good resource for capital, but if they do not have the ability to collectively provide the amount of capital that is required to properly start your business, you may want to focus your time on higher worth angel investors.
- Seek enough capital to sustain your business: Sometimes seeking more capital is not a bad thing. Do not under-sell your company. Investors will look at businesses that do not seek enough capital as putting in a dollar into a business without the hope of ever recuperating it. Ensure that your forecast and plans truly match what you need to succeed and not just what is easier to get.
- It is possible to begin using a portion of capital raised even before the entire amount has been raised: In an example, if you seek $1M in a round of investment and you currently only have $500K invested there are ways in which you can begin using the initial $500K even before you’ve raised the full $1M.
- Create win-win agreement for investors: Structure investor agreements with preferential distribution that combines interest on the capital contributed with primary right to recuperate their investment in the situation that the company is sold for a profit. In this way, investors will potentially seek less equity in order to feel comfortable with investing in your company.
- Ensure that investors have the same exit strategy: Your exit strategy will be unique to your business and choices, but be sure that your investors are aware of it. A statement that can be used to communicate this to investors is, ‘I am designing the business so it will have fundamentals with the option to grow or to sell and within 5 years. I am not interested in selling right away and I seek your agreement that you share in the same vision.’
- You can maintain control as a founder: It is important to balance your control of your company while giving management teams and investors their right to the decision making process of the business. Give investors the right to veto, but you can maintain control of decisions.
- A corporation is not required to provide equity as an incentive to employees: An LLC can be used to create a pool of equity to issue to employees. I had been informed before it is easier to do this through a corporation , but this is not true.
- Competitors can be good: As a small business, if you can associate your brand with popular and familiar brands the strength of your business and brand can be increased. For example, having consumer feedback that says your brand is just as good if not better than the nationally known brand is a positive thing.
- Employee titles are important and should be used wisely: People take value in titles. But be sure to issue them according to responsibility. Either too ‘high’ of a title or too ‘low’ of a title can be detrimental to the ability for the company and the employee to succeed in their responsibility.
- Seek boutique public relations firms or freelancers: Few large public relations (PR) firms fit the needs of a small business. Large firms may cost a lot and may not provide the bang for your buck. Find boutique PR firms. You will typically find that they will not push your company off to lower level staff like a large firm may. In addition, you can look for a seasoned public relations freelancer who has all the media connections from their past experience.
- Financial forecast tip: Instead of putting the year (example, 2006) over the columns of your financial forecast data insert, ‘Year 1’, ‘Year 2’, etc. Investors are more interest in the number of years to meet milestones.
- I will continue to develop information to validate my business. I will be obtaining testimonials from vendors, bartenders, and customers alike. This may include a video of customer feedback on the product.
- Rather than seek $500K-$1M, I will be seeking $1.5M in the first round of investments to have enough capital to reach a cash flow positive position.
- I will continue to detail my business plan. I will provide a summary of the use of proceeds for things like public relations and marketing along with their milestones.
- In addition to the experienced brand manager that I have ready to go. I will be seeking a CEO to be ready to be hired when the capital is acquired.
- I will be looking towards seeking higher net worth individuals who can reasonably participate with a bigger investment as required by the business.
After having an amazing day with Jeff, Rich and the
Startupnation family, I left
James Lim Founder Haamonii Smooth - introducing the world`s first ultra premium Japanese shochu www.livesmooth.com 415 254 4338