iComTrader Blogs & News

Innovate to Raise Hell, Articulate to Raise Capital, Understand Business Valuation

Posted Tuesday November 3, 2015 10:35:01 AM EDT

Nowadays, the majority of business owners that are reaching out to me for help with the development of their early stage business seem to think that the first step of the process is to secure capital from outside investors followed by the building of the visions value propositions and then introducing it to the marketplace to see if the idea will generate interest.

Now that you have invested an enormous amount of your time and money to start up a business based on your vision it’s time to get it launched.

Of course you realize that you can’t get to the next plateau without additional funding or finding partners to help you achieve your goals. This may mean selling a portion of your new venture to outside investors, which of course will beg the question “how much is this worth?”.

It is typical that a startup enthusiast will believe that they have a masterpiece already built and that their “sweat equity” deserves exorbitant compensation and becomes a factor in valuing the business. Of course, they couldn’t be more wrong.

It is often the valuation of a founders sweat equity and the subsequent expectations of being compensated for it, which creates the primary divergence between a founder and investor relative to the pricing of equity of an early stage business. Compounding the problem is the mere fact that founders typically fear that they must cede control in exchange for capitalization, which isn’t necessarily true.

Using borrowed or invested money in order to increase a company’s payroll is never a good idea as it will ultimately impeded sustainable growth and can even result in a foreclosure or make you prey for a vulture investor. Money from outside investors is way too expensive to use for permanent payroll, and will ultimately deter the next round of a capital raise, particularly PPO’s.

In my experience, it is most likely that if a company is seeking capital for payroll, then they are probably spending more time seeking backers rather than trying to develop meaningful partnerships and talking to potential customers. That would be going about it all wrong!

Always keep in mind that in order to attract investors who buy into your vision as well as entertain your expectations of valuation, it is of the utmost importance to articulate your great idea with a fully developed business plan.

A plan that includes an introduction to the business idea (vision), an executive summary, an overview of the company and industry, a financial thesis and marketing plan that will disrupt and create a buzz in the target market.

Furthermore, the plan must clearly articulate how capitalization will mitigate the risks associated with new business ventures.

A professional and comprehensive plan is more likely to raise more capital, for less equity, which will manifest into a more favorable outcome for the founders.

About Raising hell!

If you have to, get help to innovate and disrupt when creating a marketing plan, An innovative campaign that disrupts the current marketplace and raises a little hell will set the stage for the next step in your business plan.

To do this, you must understand the industry and the ‘norm” of the marketplace. Then create a plan that lets that marketplace know you have arrived with a plan that helps them. A properly articulated mission statement is the key.

Simply stated, understanding your market is important, and only eclipsed by the importance of your target market understanding you!

Whether pitching to investors or a marketplace, articulation is the most underrated skill I know of, and in the pursuit of business success, innovation, execution and articulation (pitching) should be left to the experts.

When it comes to developing a “go to market” campaign, the same objectives apply as building the initial business plan.

Questions must be asked and answered in the marketing materials. What is the purpose? Does it speak to an audience that you believe is its target market? Will this audience understand your product? Is it an existing business that includes a strategic plan for future growth? A plan for a start-up should include growth for the future.

A plan for growth in an existing business should have the same strategic approach with projections and hard data that will attract investment.

Building a business plan is similar to putting together a puzzle. All the pieces must fit. Trying to put people in places that don’t fit, will be result in a colossal waste a of time & money.

AUTUS Advisory Partners is uniquely qualified to assist in crafting a comprehensive business plan that would address the requirements of investors by identifying and developing the foundational elements whether IT, marketing, distribution, financial management or even personnel recruitment that tie into the company’s financial plan and forecasts.

Not only can AUTUS develop and write the plan, assist in building realistic financial models that incorporate the use of new capital but also address the practical issues associated with building a business.

Always remember, the mission of getting a business on a successful path must become a purpose even greater than yourself in order for both to be succeed.

About Me – I am an entrepreneur that has created and developed several global businesses (including the iComTrader Int'l Group and iComTrader.com).  I now spend most of my time as an independent consultant for startups and early stage ventures as well as engage as a retained independent operating partner for VC/PE at my VENATURES LTD (
www.venatures.com) and as chief development officer, business architect, advisory board chair and investment officer for AUTUS Advisory Partners (www.autuspartners.com).

Let me know if you need me to be your "hired gun".

James Vena 

E Mail me to jvena@venatures.com
Follow me on Twitter - @jamesavena

"Capital isn't so important in business. Experience isn't so important. You can get both these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn't any limit to what you can do with your business and your life." — Harvey Firestone

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