Are you struggling to find a lead investor for your business?
Finding the right investor is more than just identifying those that invest in your industry and life cycle stage. Investors, and in particular lead investors, are commonly going to take an active advisory role in your company.
Alignment with your lead investor on values, belief systems, and overall goals is essential. When you are faced with this decision, realizing this is a long-term relationship that will impact your company’s future is an important aspect to your success.
What Defines a Lead Investor?
The definition of a lead investor varies on who you ask:
1. Someone that helps work with the entrepreneur to organize the other investors and any soft commitments.
2. The first person who invests in a particular round. However, this does not necessarily mean that your first investor will provide the greatest amount of capital.
3. Someone who provides the highest amount of capital in a syndicated round.
Regardless of which definition resonates with you the most, it is important to know that our lead investor will be an important one to the success of your business. Keeping that relationship positive and professional will expand your capital even further down the road in various aspects.
Why is Choosing the Right Lead Investor so Important?
Beyond providing essential operational capital, lead investors have other effects on a company. To start, securing a lead investor will provide a level of comfort to other potential investors. Nobody wants to be the first to show up to the newest and hottest night club, right?
Similarly, every investor or investment fund combs through their deal flow, looking for the right opportunity. Having a noteworthy first or lead investor can shorten a financing round, for it conveys a sign of trust.
Without a lead investor, other potential investors will have reservations, even in the best of market circumstances. As we’re all experiencing this challenging financial climate, entrepreneurs need to take every possible step to reduce the perception of risk.
Securing a lead investor is critical in that trust-building process. They signal that there is a future promise of an ROI and solidify the team and business model are strong. Partnering with a lead investor who places a sizable initial investment signals confidence, and like a gravitational magnet, pulls in other investors more easily. This helps propel your valuation and closes your round at the desired amount
Finally, investors travel in circles. Landing your lead investor gets you access to their network of influence, again improving the likelihood of closing your round more quickly.
Where are the Lead Investors?
While success depends on networking and follow up (Remember: The noisy wheel gets the deal!), there are a large number of tools to help streamline this critical part of the job.
For starters, entrepreneurs can purchase subscriptions to sites like CrunchBase and Pitchbook. These sites provide endless amounts of data, from who has raised capital, when, and how much. They also show the investors that are backing each company.
Finding investors can be done without purchasing expensive tools. Sitting down and doing research on Google or inside LinkedIn can reveal investor networks in your area. Most large cities or entrepreneurial communities have investment funds, accelerators, and groups that are always searching to build upon their deal flow.
After putting in the work to network, build relationships, and develop your pitch, entrepreneurs can also apply to pitch competitions, further exposing them to high net worth individuals. If you still need help, you can always hire an investor relations ninja to help open doors and make introductions
Finally, if all of this isn’t working, you can work on the other side of the equation and network with recently funded companies. Communicating with other founders in your space and life cycle stage can help open opportunities for networking and capturing investors, all while possibly teaching you valuable information about their experience with their personal process.
The Importance of a Good CRM
The best way to find a lead investor is through prioritization of your leads and management of those relationships through a CRM, or Customer Relationship Management platform.
The main benefit of utilizing this tool is to organize and assist with communication and to respond to any requests promptly, such as providing information or updating pitch materials to potential investors.
Key metrics to prioritize investors by include:
· Their track record as a lead investor
· Their ability to syndicate
· Knowledge and experience in your space/business stage
· Ability to interact with and manage other investors if necessary
· The amount of capital they have to deploy
This certainly isn’t an exhaustive list, and there will be other factors to consider. As you go through the process of raising capital, remember that patience and positivity are essential. Raising money is a brutal
process, and the road is riddled with many who will say no. Just keep building and remember that timing is everything, and eventually, your day will come.
How to successfully Raise Capital
Are you finally at the point where you need to develop a better process to raise capital?
Every successful task requires a good process. The more difficult and time consuming a task the more essential an effective process becomes. When it comes to raising capital, this can translate to whether your company hits its goals, achieves the desired valuation. With this in mind, what can you do to improve your performance?
Setting the foundation
With our clients, we advise them based on our past success and failures. This advice is a well-constructed soup to nuts process that entrepreneurs and early stage companies process that can be followed every in every round.
Key elements we instruct on, include:
· Researching your potential investors
· Getting advice early and often
· Crating all the necessary collateral like pitch decks and executive summaries
· Nurturing relationships
· Choosing the terms
· Following up
· Closing the round
· Delivering on promises to each investor.
When planning to raise capital, it is important to understand that investors aren’t going to invest in your company without having an established and valued relationship. Equally important to understand is that not every investor is the right investor. Therefore, taking the time to build relationships is key to future success as these individuals will often take on advisory roles or board seats. With that in mind, expect that raising a round will take months in the best of times. With the global Covid19 pandemic disrupting markets and spooking investors, it can take longer. So being patient and setting appropriate expectations will help ease minds as the next market disruption can happen at any moment.
As you go down this road, you will need to treat the capital raise process like sales. Each lead requires constant nurturing and follow up in order to close. Larger deals can take up to a year so even when you’re not raising capital you should be strengthening relationships.
Remember, set appropriate expectations, be patient, and start preparing for that next round today.
When planning your process, it should be noted that there is no guarantee of success relative to your timelines, valuation, and financial benchmarks. This shouldn’t come to a surprise as every aspect of the entrepreneurial journey is riddled with roadblocks.
To that end, if you are willing to take on the advice form mentors and be humble and resilient you can get to the finish line. Willingness to adapt and change strategies will always be key tools to realize the goals set forth in your business plan and executive summary. Once again, expect unforeseen challenges like changes in the global markets to happen and be willing to do what it takes and be unreasonable when it comes to success.
When will it end?
Raising capital isn’t fun but it’s essential if you want to build growth and success. Making sure that you hold on to a positive state of mind will make a huge difference in overcoming each challenge. This is important to pass on to your team as they will be looking to you for guidance and leadership. Visualizing failure breeds apathy in those around you, whereas living future success in the moment will create a culture of resilience and tenacity.
Create a great pitch deck
Selling you vision requires a quality deck that follows a well-defined template. Without a great pitch and deck, it will communicate a weak message to investors that are inundated with deal flow. Consider the point that you are only as strong as your weakest asset. This is equally important in the quality of your team that must constantly execute despite lacking money or resources.
Don’t be the smartest person in the room
Even people at the top of their fields look to get better or gain any advantage to stay at the top. Just look at Tony Robbins and Tom Brady. They are world renowned, very successful, yet they continue to find an edge. If they’re doing it so should you. Surround yourself with coaches, and experts to remove blind spots. When it comes to raising capital, seek out those that have a track record of success and absorb all that you can. Remember, you are competing with potentially hundreds or thousands of other entrepreneurs in your space for limited investor capital.
Network! Network! Network!
We live in a noisy world full of notifications, news feeds, texts, emails etc. Therefore, knowing how to get through to investors requires a lot of follow up work and relationship building. Be creative when it comes to getting through to those key investors. Learn who they are influenced by, learn who their gatekeepers are and use every type of communication to follow up with them in an attempt to build relationships with your targets.
Knowing what you don’t know
Every entrepreneur starts off with a different composition of skills, and weaknesses. Likely, raising capital is not among your strengths. Therefore, as you learn all the things you need to know to build a successful organization, add raising capital to that list! Sure, you can go and hire an investor relations ninja. However, being prepared to fight as though your life depends on it requires being knowledgeable when it comes to communicating, negotiation, networking and follow up. Regardless of your industry, being a constant student will improve your chances of not being ignored.
Acommon narrative among the world’s most prized companies is their early development as startups. In the past, creating a large and successful enterprise was seen as a major undertaking.
Today new businesses launch in small industrial spaces, spare bedrooms, even in garages. Globally, small businesses make up a significant portion of the global economy. In the U.S. alone, businesses of 500 employees or less comprise nearly half of the economy.
Despite these small beginnings, many startup owners are seeking exponential growth of their business, often with a single-minded vision of being acquired by a larger company.
In his number one Wall Street Journal bestselling book, Gary Keller extolls a concept called The ONE Thing. In it, he poses the question:
At equaSTART, our laser-focused intent and “one thing” is to help mitigate the friction associated with new business formation, management, and ownership. We seek to help businesses begin on a solid foundation, one that allows them to accelerate their market entry while eliminating costs.
Large, well-funded companies often have a wealth of resources to fuel their strategic growth, thereby gaining a decided advantage in the marketplace. equaSTART hopes to bring balance to this startup playing field by delivering a cost-effective, streamlined destination for business management activities such as documents, banking, and compliance.
The equaSTART platform allows members to form a new business entity, obtain a bank account, and secure a tax ID within minutes. All of this significantly reduces the amount of time and money associated with forming and managing a business.
The Building Blocks
EQAU founder and CEO Shawn Owen, says the company’s primary focus is to deliver a quality user experience to those starting a business or entrepreneurial venture. In other words, how to bring efficiency to the end user whether it’s an owner, business manager, investor — anyone who is the part of an organization.
Comments Owen: “Anytime you can make something more efficient and save people time and money, they love it.”
But the bigger picture, he says, is the notion of a central source of truth. In other words, once you have everyone’s information in one place, why not evolve it into all the other forms of agreements that people make.
“There is always a series or sequence of agreements tied to business transactions. Keeping these in one place allows you to free up time for your “One Thing” which is to deliver a great product.”
Owen also underscores the theme of simplicity for business owners:
“When you get too technical people get scared. By way of example, think about something as simple as bitcoin. When you talk about what Bitcoin is in a simple way, people are like, ‘I get it. It’s digital gold or whatever.’ But when you get too deep into the details, it can actually be very complicated. So at the end of the day, we want to avoid confusing people and keep their lives simple.”
Continues Owens: “One of the things I have always wanted to see and I think most people who are technology advocates also want to see is a user interface and experience that’s easy enough for even a grandmother to use. In other words, they are intuitively able to use it without having to know too much.”
Heconcludes: “Our goal is to make user experience our number one focus so a person would never have to know anything about the underlying technology. As long as someone gets just the basics, they’ll be able to use it.”
To learn more about Equa and sign up for a free trial, please visit us at www.equa.global
Today’s cannabis market is smoking hot. Startup launches abound. Consumer interest is robust. Regulatory guidance is rapidly evolving.
These trends show no sign of abating. Marijuana is fully legal in 11 U.S. states and the District of Columbia. It is medically legal and/or decriminalized in 24 others.
According to Grand View Research the global legal marijuana market is projected to reach USD 146.4 billion by the end of 2025. This has spawned a flurry of new startups worldwide.
According to Fit Small Business, the cost to launch a regulated cannabis dispensary is approximately $775,000. Annual operating costs for a regulated dispensary average are around $1.92 million annually.
As is the case with any developing industry, the cannabis space is ripe with ambitious entrepreneurs who are often still new to the business world. At the same time, there are experienced business leaders who can set the pace for the others.
With the continued evolution of the industry, heavy regulation is beginning to take hold. With oversight and conformance with state laws and regulations vital for success, startups need a single source of truth where organizational decisions and actions can be effectively facilitated through document creation, management, and cap table management tools.
An Evolving Landscape
The cannabis industry is facing a corporate governance problem. And it’s one that startups can ill afford to turn a blind eye to, given the frequently changing regulatory landscape.
Today’s cannabis businesses must maintain strict compliance with state regulations along with federal law. Often shareholder registries are managed through the use of rogue spreadsheets. Because of the human element, they are often susceptible to errors.
The issuance of new shares or options prompt updates to these registries. Many early-stage companies use convertible notes which transfer into equity based on targeted milestones. The problem with this is that these transactions don’t always occur correctly. So anytime there are discrepancies in these records, they can be very time consuming and costly to reconcile.
Given the importance of these authentic record of ownership, these errors can be problematic. If the information is incorrect or out of date, contacting shareholders to vote on major acquisitions or a sale can prove difficult.
This is where the promise of a new normal comes into the picture.
In short, Equa START endeavors to allow companies to focus on their core business while taking care of the nitty-gritty backroom stuff that they cannot achieve in terms of bandwidth, knowledge, and experience.
There are a number of ways that EquaSTART hopes to become a differentiator for cannabis companies:
Compliance:Because Equa START is an all-in-one documents platform it can help address regulatory concerns, It can also serve as a valuable tool for KYC (Know-Your-Customer) procedures.
Information Transparency: The blockchain allows for the storage of relevant corporate information (i.e., shareholder name, address, shares, etc.) all on a digital, immutable ledger. This will provide an easy way for shareholders of cannabis enterprises to register their holdings directly with the company, rather than through a broker. Moreover, a distributed ledger approach can offer greater public access to share ownership percentages, boosting the likelihood of more informed investment decisions.
Voting Transparency and Shareholder Engagement: Equa START can provide a mechanism that allows shareholders easier access to their voting rights, proxy transfers (if required), and more accurate vote tallying.
Organization and Efficiency: Equa START can mitigate the need for paper share certificates while providing an accurate documentation record of shares issuance and ownership. It can help streamline organizational processes as well as reducing asset transfer settlement times. And in some cases, counter-parties could potentially be eliminated altogether.
Conversions: Through the use of smart contracts, preferred shares could automatically be converted to common shares with each financing round. Each transaction will be recorded in the digital ledger, eliminating the need for human updates or multiple copies of shared registries.
To learn more about Equa and sign up for a free trial, please visit us at www.equa.global
Starting a business is an exciting endeavor. The possibilities for success are unlimited.
But the road to success is not easy. It requires long hours, dogged persistence, and the expenditure of funds.
With the takeoff of your entrepreneurial venture, you may have noticed the impact it’s having on your time and finances. This requires your constant attention in order to ensure that these vital resources are not depleted.
Developing a business plan without an effective cap table or other financial tools often lead to unfortunate business failures. Without a mechanism for accurately tracking historical financials, it becomes a challenge to accurately assess new company revenue and costs.
The good news is that while these critical obligations may be a challenge, they are certainly manageable with the right systems in place.
Here at equaSTART, we provide a broad range of solutions for managing the time and financial demands of your business. Targeting the simplification of business agreements, our platform allows members to create a new business, obtain a bank account, and secure a tax ID within minutes. This allows business owners to significantly reduce the amount of time and money involved in establishing and managing a company.
Starting a business can be a time and money vacuum. Given the explosive growth of small businesses and registered entities worldwide, equaSTART is on a trajectory to becoming the pre-eminent one-stop global destination for documents, banking, and compliance.
Says founder and CEO Shawn Owen: “We are excited to offer an enterprise cloud solution that allows businesses to draft, sign and manage all of their operational agreements. We also provide tools for managing an organization’s capitalization table and ownership structure.”
He concludes: “Ultimately, the real magic is in the ability to manage ongoing edits or evolution's needed for any action or transaction from your dashboard at the click of your fingertips. We aim to make corporate governance and high finance easy and fun while providing business leaders with an efficient system for managing their time and financial demands.”
To learn more about Equa and sign up for a free trial, please visit us at www.equa.global
Launching a new business? Putting in long hours?
Now for the not so good news: You’re likely going to have a few bumps and hurdles along the way.
As an entrepreneur the possibilities for errors are endless: Like failing to file important compliance documents. Or overlooking an important tax filing deadline. How about blowing through all of your startup funding.
When these and other mishaps occur, it’s so easy to write them off as simply another case of “we didn’t know what we didn’t know.”
But here’s the good news:
Every mistake you make is a learning moment
Below are seven of the most common pitfalls startup entrepreneurs make when launching a new business.
Regardless of whether you’re a newly minted entrepreneur or have been into your business for the past 2–3 years, we invite you to capture some notes and heed the call to action on what you read below.
Pitfall #1: Too Much, Too Fast
You’ve started your business and the adrenaline is flowing. Things have reached a fever pitch. You’re feeling ambitious and on top of the world. And yes, of course, you’re expecting immediate results.
“Next week we’ll be profitable,” you tell yourself. And then you have a Chinese Bamboo Tree moment.
When you find yourself in this trap, it’s important to keep in mind that we often OVERESTIMATE what we can achieve in “Year One” while UNDERESTIMATING what we can do in say Year Five.
The lesson here:
Mistakes are going to occur. So you may as well learn from them.
Pitfall #2: Putting off Setting Up a Corporate Entity:
If you have a highly conservative accountant they will likely tell you that you can get away with simply registering with your Secretary of State as a sole proprietor. But there’s more to this story so listen up: Setting up a business entity ( LLC, S Corporation, or C Corporation) right out of the gate may be an important step for you to consider for one major reason, namely, it can serve as a form of liability and personal asset protection in the event that you’re sued.
Pitfall #3: Not Having a Good Bookkeeping System
Here’s an often overlooked fact: Having a great bookkeeping system (i.e. keeping those receipts) will not only allow you to maximize your tax writeoffs but save you a ton of headaches and extra CPA costs at tax time.
Back in the day, the modus operandi was to toss all of your lose receipts in a bag and hand them off to your bookkeeper monthly for reconciliation. Today we have great online sites and apps that can assist with digital downloads of bank statements and receipts. So there are no excuses for not having a good system in place.
Pitfall #4: A Lack of Startup Funding
It’s well documented that the number one cause of business failure is a lack of funding and working capital. Therefore it is an important piece to get a handle early on in terms of what will it take to keep your business running on a day-to-day basis. Otherwise, this disconnect could lead to funding shortfalls that might quickly put your business in peril.
Your Secret Sauce for better funding outcomes: Learn about the importance of Cap Tables.
Pitfall #5: Poor Sales Execution and Growth Mindset: As a startup, building a sales funnel can often lose importance in our list of priorities even though we are well aware of its importance. It goes without saying that this can lead to disastrous consequences.
Grant Cardone in his bestselling book entitled The 10X Rule: The Only Difference Between Success and Failure admonishes us to take massive action in the work that we do, saying that it is vital for the success of our business.
Here is a brief video of Grant discussing his 10X Growth Mindset!
Pitfall #6: Taking Shortcuts With Your Product or Service
The late inspirational speaker and thought leader Jim Rohn noted in one of his early seminars, “You get paid for bringing value to the marketplace, and if you’re not very valuable you don’t make much money.
The same is true for your business: The MARKETPLACE VALUE of your product or service is what will ultimately determine your business success. In other words, if you focus on all of the other details of your business versus working on the quality of your product or service, your business will likely see an early demise.
Pitfall #7: Lack of Strategic Direction
Here’s the key: Find your business sweet spot and then stay in your lane. Because if you disperse your energy in too scattered of a fashion, you will experience the Law of Diminishing Returns and your business will crumble.