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Attracting Investors

How to Persuade Your Boss to Fund Your Business Idea

Shara Senderoff dreamed up Intern Sushi in 2005, when she was at college.

Michelle Goodman

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Lacking the cash to launch a start-up, she finished school and took a job in the film and TV world as assistant to mega-producer Mark Gordon. By 2010, Senderoff was developing feature films and web series for The Mark Gordon Co.

But her idea for a website that would connect interns and employers still beckoned. In late 2010, she dusted off her old business plan and pitched her boss the idea.

Gordon gave her the green light to develop the site internally, on his company’s time, dime and payroll.

The initial plan was for Senderoff to split her Intern Sushi and film-production duties 50-50. But by September 2011, she says, her site had become “a machine of its own.” Senderoff left The Mark Gordon Co. to run Intern Sushi full time, and Gordon, who’s billed as a co-founder (along with Senderoff and ad man Richard Gelb), became one of the start-up’s earliest investors, sinking six figures into the venture.

Today 20 000 interns and 2 600 companies use Intern Sushi, which officially launched this fall and features 5 000 open positions in 11 industries. The company, which initially drew $800 000 in funding, is currently completing its second investment round.

For Senderoff, having the support of a boss who believed in her was windfall enough. “I was fortunate to be a salaried employee before I took the big risk of being a start-up,” she says. “It’s an incredible gift to be able to focus on getting your business off of the ground without having to worry about how you’ll pay your rent.”

You don’t have to work for a Hollywood mogul to sell your start-up idea to your employer. More companies, in a variety of sectors, are recognising that the key to competing in today’s warp-speed marketplace is encouraging entrepreneurial thinking from within – otherwise known as “intrapreneurship.”

“We are in a time that’s calling for a lot of innovation,” says Gifford Pinchot, a Fortune 100 consultant who has written several books on intrapreneurship. “Companies that are supportive of entrepreneurship are in more of a position to thrive.”

That’s why innovators like Google and 3M famously implemented policies to let employees spend a percentage of each week on their passion projects. It’s also why consulting firms such as Ernst & Young and PwC have begun holding in-house entrepreneur contests.

But it’s not just a matter of quashing the competition. It’s also about keeping employees happy. “Companies are kind of forced into it,” says Dan Schawbel, founder of Gen Y consulting and research firm Millennial Branding, because “retention rates are terrible.”

A recent study commissioned by Schawbel’s firm found that nearly one-third of employers look for entrepreneurial experience when recruiting entry-level candidates. “A decade ago that wouldn’t have happened,” he says.

Making Your Pitch

To use your employer’s hunger for innovation to support your own projects, start with ideas that feed the company business model.

“Those are the types of projects that are the easiest for anyone to talk about within the company and get funded,” says Ikhlaq Sidhu, founder of the University of California, Berkeley’s Fung Institute for Engineering Leadership, a fast-track entrepreneurial program for engineers.

That’s what Dr. Lisa Tseng did. In March 2011, while working as chief of staff for UnitedHealthcare’s public programs, she pitched the insurance company’s upper management on a way to make hearing aids – which often cost $6 000 to $8 000 per pair –more affordable. Because her idea fit with her employer’s mission of improving healthcare, it was a slam-dunk.

“We were told to move forward right after the presentation,” says Tseng, who immediately became CEO of hi HealthInnovations, the start-up she proposed. Today hi HealthInnovations sells high-tech hearing aids for a retail price of $749 per ear.

Researching the heck out of your idea is another must. “Know your market really, really broadly and your consumers really, really narrowly,” says Michael Kestenbaum, CEO of Crowded Room, a location-based mobile app that his employer, internet company IAC, funded and let him develop in 2010.

“If you’re creating a baseball app, know what the baseball fan looks like. Know how many times a year they go to the game. Know how they get to the game. What they eat when they’re at the game. But at the same time, know the sports and live events market.”

Even if it’s a long shot, your pitch needs to offer information with value. “If you’re going to sit in a meeting with the CEO of your company, make sure they get something out of it,” adds Kestenbaum, who was in mergers and acquisitions at IAC before running Crowded Room. They may shoot down your first idea, he says, but that’s how you get invited to pitch again.

Knowing what you’ll say in your pitch is only half the battle, because how you say it is just as important. “The last thing you want to do is start with a super-detailed slide presentation to a CEO who doesn’t like being presented to via PowerPoint,” Kestenbaum says.

Senderoff agrees. When she proposed Intern Sushi to her time-strapped boss, she knew the key would be getting to the point in the first 60 seconds – much like a Hollywood script pitch. Because Gordon is “a very visual guy,” Senderoff relied heavily on charts and graphics to illustrate her business concept, market and revenue model, rather than plonking a 30- to 50-page business plan on his desk.

Read Next: How Investors See Your Business

Juggling Two Jobs

It can be a balancing act to double as an entrepreneur and an employee. You want to pour your heart and soul into your baby and show management they were right to invest in you; at the same time, you have to do your day job justice.

Jamie Pritscher knows this juggle all too well. In 2009 she convinced her employer, Chicago-area business caterer Tasty Catering, to expand its modest corporate gifts division into a full-blown e-commerce company, with her at the helm.

The result was That’s Caring, which sells environmentally friendly gift baskets. Pritscher received $50 000 in seed money from her bosses, along with their blessing to work on That’s Caring during business hours if needed, as long as she could keep up with her duties as Tasty Catering’s full-time logistics director.

During the holiday season, when That’s Caring does 75% of its business, Pritscher regularly pulled 80-hour workweeks. “Your first year in business, you’re not really sure what to expect,” she says. “People wait last-minute to order. And I wasn’t used to that. The second year was much easier.”

On the plus side, birthing a start-up as an employee means that good mentors are in the cubicle next door. Having the ear of Tasty Catering’s sales team and executives was a boon for Pritscher, who’d never run her own operation before.

“Being able to walk up to the desk of someone who has been in business for 40 years and talk out business problems and walk away with a solution in 20 minutes instead of trying to figure it out on your own – it’s priceless,” says Pritscher, who left her gig as logistics director in 2010, when That’s Caring began making enough money to pay her salary.

Free access to on-site support services is another bonus of intrapreneurship, says Michael Paladino, director of technology activation at Rockfish, a digital agency based in Rogers, Arkansas.

“We don’t have to worry about some of the infrastructure that start-ups do,” explains Paladino, who as a newly hired web developer in 2009 spearheaded Rockfish’s development of TidyTweet, a Twitter application that filters out spam. “We have billing in place. We have hosting in place. I have access to our legal team. I have access to our creative team.”

Read Next: What Not to Do When Pitching Investors

Shared risks, shared rewards

For the risk-averse or cash-strapped, having an employer incubate your start-up can be a happy medium. No, you won’t fully own your creation, but you won’t have to fork up the seed money, either.

Pete Balistreri was all too happy to make this trade-off. An executive chef at the San Diego location of Tender Greens, a California restaurant chain specialising in sustainable food, Balistreri taught himself to make cured meats on the job. Soon the menu began featuring his salami, and his bosses invested in a $5 000 professional curing chamber.

This August, with the help of Tender Greens’ owners, Balistreri launched his own line of packaged meats, P. Balistreri Salumi, which the restaurant will sell in its seven locations. Plans include distribution to other eateries and artisan food retailers. The company is a partnership between Balistreri and Tender Greens’ three owners, who footed all the start-up costs.

“It’s a big deal for me to have made a 35-pound batch of salami and then to see a 500-pound batch of it made,” Balistreri says. “I would never have been able to make this product and sell it on my own.”

But your intrapreneurial efforts don’t need to result in an eponymous product label, swanky new title or co-ownership to give your career a boost. Just pitching and attempting to start a new venture will earn you a reputation as a trailblazer, says innovation consultant Pinchot. “And in companies where that’s important, innovators move ahead of their peers,” he says.

What if, despite your best efforts, your baby falls flat on its face? If nothing else, it’s a learning experience, for you and your employer, says Crowded Room’s Kestenbaum. “The knowledge that you’re going to gain is tremendous,” he says.

“Getting to know a market, getting to know consumers, getting to know technologies – that stuff is valuable regardless of whether your start-up succeeds.”
Intern Sushi’s Senderoff concurs: “The experience that I’ve gained from taking a company that was just me to 25 employees – I would pay to have that experience.”

Sowing the seeds of autonomy

Want the keys to the entrepreneurial kingdom at work? Start laying the groundwork now.

Earn your boss’s trust. Before you polish your pitch, make sure your rapport with your manager is up to snuff. If your boss doesn’t have faith in your work, judgment or time-management skills, he or she is not going to let you launch a new product, service or company division.

Broaden your skill set. Don’t know diddly about marketing? Never met a spreadsheet you could decipher? As an employee, you have an entire company of people, projects and training resources at your fingertips. Use them to shine light on as many blind spots as you can.

Stay aboveboard. Going rogue is a bad idea, says Ikhlaq Sidhu, who teaches entrepreneurship to engineers at UC Berkeley. “You don’t want to do anything that your boss might be completely surprised about,” he says. Instead, win your manager’s support for your idea early on. You’ll get further with him or her on your side.

Build stakeholder support over time. Take the time to amass a network of influencers who are as invested in your idea as you are, Sidhu says. The more customers, partners, co-workers and managers you have on board, the more likely you’ll be to get your idea funded.

Michelle Goodman is a Seattle-based freelance journalist and author of The Anti 9-to-5 Guide.

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Attracting Investors

6 Great Tips For A Successful Shark Tank Pitch

Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes.

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Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes. Entrepreneurs will often need to promote their businesses to prospective customers, lenders, investors, employees and even suppliers.

All stakeholders would like to know with what and whom they are dealing. They will need to assess risk and will try and evaluate the business against others who are competing for those same funds.

1Know Your Product

You should be able to describe your business within 60 seconds, in a confident and positive manner. Let the stakeholder know what particular problem your business solves which makes it viable and attractive.

Your brand and how you intend to develop it is important in determining whether they will invest or lend you money. Share critical information with them such as large customers, patents and trademarks and details of forward orders.

If you are looking for funding or investment, make sure you have the relevant paperwork to back up what you are saying.

Related: 10 Tips From The Dragons Of Dragons’ Den SA

2The Numbers

You must have your numbers at your fingertips.  A true and successful entrepreneur will know his numbers instinctively and be able to recollect and present them convincingly. Stakeholders want to know your turnover (sales) over the last couple of years, your gross profit and net profit.

Investors want to know what they are investing in and whether there is strong potential for their money to grow. Lenders will want to assess their risk — how are you going to repay the money? Moreover, you as the business owner, need to be sure that you will be able to make the required repayments.

You must know what your margin is, as this will largely determine your viability as a business. Margin or gross profit is the difference between the selling price of the goods and their cost and is usually expressed as a percentage.

3Know What You’re Asking For

asking-for-business-funding

Be clear as to the size of the investment you want to give away and how that determines the ‘valuation’ of the business. Therefore, if you wish to raise R200 000 for 10% of the business, that means you value the business at R2m — be sure you can back that up or you will get taken apart.

4Have a Business Plan

The best way to fully understand your business is by way of having a detailed business plan, which has been prepared whilst working through every facet of your business, from the original idea to the finished product.

As the business owner, you need to live this business plan and be able to use it as your daily guide to success. Develop it, change it where circumstances require it, but most importantly know it and understand it.

In this way, you will be able to deal with most of their questions, be they about marketing, research, international expansion etc. It is also a good idea to know your competition and what they are up to.

Related: Dragon’s Den Polo Leteka Gives Her Top Tips To Attract Growth Capital

5Sell Yourself

In most interactions, you the entrepreneur, are selling yourself. Whether it is an investor, lender, customer or prospective employee, it is their impression of you and your capabilities which ultimately determine whether they want to work with you.

Be confident, defend your position where required, as you will need to parry some blows but do not behave arrogantly.

6Learn From Your Mistakes

Many entrepreneurs who have presented to the Shark’s Den and not been able to garner investment have turned their business into great successes. You need to be able to learn from the experience, and if rejected, bounce back even stronger.

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Attracting Investors

3 Things You Must Have In Place To Get That Start-up Bank Finance

If you’re planning to secure funding for your start-up, you need to put the right foundations in place.

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The South African landscape for raising finance is tough for any business, with stringent lending regulations. Here are three areas to focus on as you set up your start-up to ensure you’ll qualify for a loan or equity funding.

1Securing a Market

Most SMEs I have mentored or advised start with expressing how big the total market size is for their product or service, but, while this is important to understand, the big question is: What percentage of that market will you attract and how?

Look at the ‘how’ first and work your numbers backwards. For example, if you secure a R10 million contract to supply an item that has a market size of R37 billion you are capturing only 0,03% of the market. However, if you’re able to cover your monthly expenses (including your loan repayment) and make a profit, that’s what counts. You should be able to show this contract or letter of intent to procure, which shows how and where you will find this market.

Related: The One Question You Must Be Prepared To Answer When Pitching Investors

2A Strong Team

When you’re starting out you’re likely to be the sum total of your team. If you’re going down the entrepreneurial journey alone, make sure you have identified who will mentor and guide you through the areas you don’t have competencies in and cost this into the business start-up and running costs.

Focus on who in the business is going to:

  1. Sell and market: Do they have the necessary skill, network, product and market knowledge?
  2. Control the money: Are they financially savvy and can they make sure that money is being used for the right things?
  3. Operate: Who has done this before? Can this individual manufacture the product or arrange the supply of goods or services, ensure quality control and sound human resource management?

3Compliance

Formalising your business is costly but necessary. If you don’t have a formal entity, shareholders agreements, loan agreements, financial statements, management accounts, tax compliance and so on, you will come short when looking to raise finance.

Understand these costs upfront and include them into your start-up budget — this will save you a lot of pain in the long run.

Related: 3 Ways For Social Entrepreneurs To Access Fundraising

The truth is that finance is available for women who have the right business ingredients just as much (if not more — in the South African context) as it’s available for men and just as with men. And, resources such as these help to unpack and guide the core fundamentals that are needed to make business bankable/fundable.

Then it’s all about implementation and staying on track to translate all that you’ve done and all that you wish to do in a bankable business plan, and approach the relevant funder for your needs. The right business mentor can certainly help you on that journey.

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Attracting Investors

If You’re Trying To Raise Money, Doing Any Of These 9 Things May Scare Off Investors

Avoid these mistakes and funding could be yours.

Dave Lavinsky

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Most new and existing businesses can benefit from outside funding. With such funding, they can grow faster, launch new initiatives, gain competitive advantage and make better long-term decisions as they can think beyond short-term issues like making payroll.

Unfortunately, though, most entrepreneurs and business owners make several mistakes that prevent them from raising capital. These mistakes are detailed below. Avoid them and funding could be yours.

Making unrealistic market size claims

Sophisticated investors need to understand how big your relevant market size is and if it’s feasible for you to eventually become a dominant market player.

The key here is “relevant” and not just “market.” For example, if you create a medical device to cure foot pain, while your “market” is the trillion-dollar healthcare market, that is way too broad a definition.

Related: The One Question You Must Be Prepared To Answer When Pitching Investors

Rather, your relevant market can be more narrowly defined as not just the medical devices market but the market for medical devices for foot pain.

In narrowing your scope, you can better determine the actual size of your market.

For instance, you can determine the number of foot pain sufferers each year seeking medical attention and then multiply that by the price they might pay for your device.

Failing to respect your competitors

competitors

Oftentimes companies tell investors they have no competitors. This often scares investors as they think if there are no competitors, a market doesn’t really exist.

Almost every business has either direct or indirect competitors. Direct competitors offer the same product or service to the same customers. Indirect competitors offer a similar product to the same customers, or the same product to different customers.

For example, if you planned to open an Italian restaurant in a town that previously did not have one, you could correctly say that you don’t have any direct competitors. However, indirect competitors would include every other restaurant in town, supermarkets and other venues to purchase food.

Likewise, don’t downplay your competitors. Saying that your competitors are universally terrible is rarely true; there’s always something they’re doing right that’s keeping them in business.

Showing unrealistic financial projections

Businesses take time to grow. Even companies like Facebook and Google, with amazing amounts of funding at their disposal, took years to grow to their current sizes.

It takes time to build a team, improve brand awareness and scale your business. So, don’t expect your company to grow revenues exponentially out of the gate. Likewise, you will incur many expenses while growing your business for which you must account.

As such, when building your financial projections, be sure to use reasonable revenue and cost assumptions. If not, you will frighten investors, or worse yet, raise funding and then fail since you run out of cash.

Related: Top 5 Personality Traits Investors Look For In An Entrepreneur

Presenting investors with a novel – or a napkin

napkin

While investors will want to meet you before funding your business, they will also require a business plan that explains your business opportunity and why it will be successful.

Your business plan should not be a novel; investors don’t have time to wade through 100 pages to learn the keys to your success. Conversely, you can’t adequately answer investors’ key questions on the back of a napkin.

A 15- to 25-page business plan is the optimum length to convey the required information to investors.

Not understanding your metrics

How much does it cost to acquire a customer? What is your expected lifetime customer value?

While sometimes it’s impossible to understand these metrics when you launch your business, you must determine them as soon as possible.

Without these metrics, you won’t know how much money to raise. For instance, if you hope to gain 1,000 customers this year, but don’t know the cost to acquire a customer, you won’t know how much money you need for sales and marketing.

Likewise, understanding your metrics allows you and your team to work more effectively in setting and achieving growth goals.

Acting like know-it-alls

While investors want you to be an expert in your market, they don’t expect you to be an expert in everything. More so, most businesses must adapt to changing market conditions over time, and entrepreneurs who feel they know everything generally don’t fare well.

A good investor has seen many investments fail and others become great successes. Such experiences have made them great advisors. They’ve encountered all types of situations and understand how to navigate them.

If you’re seeking funding, acknowledge such investors’ experiences. Let them know that while you are an expert in your market, you will seek their ideas and advice in marketing, sales, hiring, product development and/or other areas needed to grow your business.

Related: Stand Your Ground When Looking For Investors

Focusing too much on products and product features

When raising funding, you need to show you’re building a great company and not just a great product or service. While a great product or service is often the cornerstone to a great company, without skills like sales, marketing, human resources, operations and financial management, you cannot thrive.

Furthermore, if your product has a great feature, be sure to specify how you will create barriers to entry, such as via patent protection, so competitors can’t simply copy it.

Exaggerating too much

When you exaggerate to investors who know you’re exaggerating, you lose credibility.

One key way to exaggerate is with your financial projections as discussed above. There are many other ways to exaggerate. For instance, saying you have the world’s leading authorities on the XYZ market is great, but only if they really are the world’s leading authorities.

Likewise if you say it would take competitors three years to catch up on your technology, when investors ask others in your industry, they better confirm this time period. If not, your credibility and funding will be lost.

Lacking focus

What do investors care about? They care about getting a return on their investment. As such, anything you say that supports that will be welcomed.

For instance, talk about your great product that has natural barriers to entry. Discuss your management team that is well-qualified to execute on the opportunity.

Talk about strategic partners that will help you generate leads and sales faster.

But, don’t go off on tangents that don’t specifically relate to how you earn investors returns, like the fact that you’re a great tennis player.

Likewise, conveying too many ideas shows you lack focus. For instance, saying you’re going to launch product one next year, and then quickly launch products two, three and four, will frighten investors. Why? Because they’ll want to see product one be a massive success before you even consider launching something new.

Investors have two scarce resources: Their time and their money. Avoid the above mistakes when you spend time with investors, and hopefully they’ll reward you with their money.

This article was originally posted here on Entrepreneur.com.

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