WHAT ENTREPRENEURS MUST HAVE WHEN WORKING WITH INVESTORS Raising Capital?
O ne of the biggest frustrations faced by entrepreneurs is lack of funding. It’s a pain point practically all entrepreneurs are familiar with. And it’s a major source of stress when you’re trying to move to the next stage of development in your business. Many entrepreneurs wonder why some investors are so unwilling to write them a check or to take a leap of faith on their product or business. On the flipside, some investors love to invest. But they invest with the intention of getting their money back and then some. If an investor wrote a check to every entrepreneur who came their way, they would have no money. It’s simple math. The relationship wouldn’t work. Investors must be prudent. Both entrepreneurs and investors have to navigate choppy waters to get to their respective destinations. It’s not easy, but entrepreneurs can take steps to gain the attention of an investor, or several investors, and get that check.
control. Their entrepreneur must have a high level of credibility, and the investor must believe the entrepreneur can deliver on their vision. While some investors enjoy risk (the general rule of thumb is high risk equals high reward), you still need trust. Most investors, however, want to mitigate their risk. Building trust is a good way to accomplish that. Of course, trust is a two-way street. The entrepreneur needs to be able to trust the investor and their intentions, too. Expectations between the two parties need to be established. What does the investor expect for their money once they write that check? It’s not too different from the relationships I have with my kids, who are 6 and 7. They love to explore and want to go out and do things, often on their own. But I don’t necessarily trust that they won’t get into trouble or get hurt. As they demonstrate their trustworthiness, I start to believe they are capable of handling themselves outside of the eyes of their dad. As they get a little older, that trust builds. When I see them play in the park, interact with other kids, or behave in public, I can gauge what they can handle. Eventually, I will let them go to the park on their own. For now, that’s not happening. We take baby steps. Investors also want to take baby steps. There’s a “crawl, walk, run” mentality that comes with doling out capital. As the entrepreneur builds their case, the investor might dole out a little cash. As the case builds — and confidence along with it — more
investors might come on board and bring more money along with them.
How do you start building trust and credibility? Entrepreneurs can relate to investors by telling their stories. Many investors are genuinely interested in the journey of the entrepreneur. Don’t be afraid to tell that story and talk about why you’re the right person to solve a specific problem. Build your expertise. Be relatable. Be personal. Another way to do this is to go out and build your experience and expertise by working with advisors and other experts in your industry. It’s possible to borrow credibility and to bring others on board who can help you build trust. You never have to do it on your own. Coming back to my kids, they’ve figured out how to build trust using the “expertise” of others. While I’m not about to let them walk to the park by themselves, they can tell me the babysitter is willing to take them to the park. Now, it’s a different story. They borrow the babysitter’s credibility, and it works out for them. They get to go to the park, and I don’t have to worry.
It all starts with one word: trust.
It’s easy to forget about trust when you’re so focused on building a business and getting it off the ground. You have all of these ideas you want to see come to fruition, but without trust, implementing your ideas is going to be nearly impossible. The funding won’t be there.
To raise capital, any given entrepreneur must convince any given investor that risk is under
“There are only two ways to influence human behavior: You can manipulate it, or you can inspire it.” –Simon Sinek
manipulations like price and product details. But if you help people understand why you do what you do by revealing the real purpose and intention behind your actions, you build a sense of trust. This trust leads to loyalty, and loyalty means that person comes back to do business with you and also refers your business to others. This is how businesses grow! Figuring out your “why” is a process of discovery, not invention. Use these three key strategies to discover your “why.” • Look backward at the original motivation for starting your business. What specific problem were you trying to solve, and why was it important to you to solve it? • Look outward by asking why those around you spend time with you or why a customer buys from you. You can learn why people are drawn to you and your business this way. • Look inward and identify a bigger vision that you wish to contribute to. What do you believe in? What really matters to you?
It can often be hard to clearly articulate what you do for a living. That means it can be difficult to explain your vision to potential clients and customers, which then makes it harder to convince them to purchase your product or services. In “Start With Why: How Great Leaders Inspire Everyone to Take Action,” author Simon Sinek illustrates the importance of explaining to others why you do the business you do rather than explaining what you do or how you do it.
‘START WITH WHY’ AND BETTER BUSINESS WILL FOLLOW
Sinek argues that when people start figuring out the “why” of what they do, it inspires action from others in a way that discussing the “what” can’t. Talking about the “why” engages emotions; analyzing the “what” is purely logical. When you try to sell something to people based on its “what,” you rely on specific
We’ve relaunched the Angel Investors Network (AIN) Inner Circle! A NEW LOOK FOR Our Inner Circle It’s all about continuous learning with a healthy dash of collaboration. Plus, as you build your network, you build your trust.
You can now log in to the member’s area to better connect and communicate with AIN’s other members — entrepreneurs and investors alike.
There is no doubt that networking can be challenging, especially when you’re just getting into the world of entrepreneurship (or investing, for that matter) or starting a brand-new business. It can be a struggle to find the right network or to make meaningful connections, so we try to make it as easy as possible for you. Entrepreneurs looking for capital may find it challenging to connect with the right investors. But chances are that there is an investor out there who is looking for their ideal match, too. It’s a lot like dating. You will have to go on several “first dates” until you finally meet the one, and you must each offer things to the other that make sense. That’s when you get that “click” we are all looking for. You never know what opportunities and new ideas are waiting around the corner until you ask. If you are not already a member of our Inner Circle, you are missing out! And right now you can take a test drive for only $1! Simply go to www.AngelNetwork.com/InnerCircle today to learn more and sign up!
Share deals, investment opportunities, workshop ideas, and more. You’ll never be left behind again!
As always, you will also find a wealth of resources, from training materials to guides on building a better business and investing in startups. It’s a one-stop destination for education and networking. THE POWER OF CONNECTIONS
One of the best things any entrepreneur can do to enrich themselves and their business is to curate a solid network. When you have regular conversations with other like-minded individuals, both in and out of your niche or industry, the learning potential is practically endless.
As we mentioned in this month’s cover article, entrepreneurs benefit greatly when they can connect with advisors, coaches, mentors, or other experts who can offer insight and advice.
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HOW TO STOP CAREER BURNOUT IN ITS TRACKS STRESSED OUT? I n the modern work world, stress is practically unavoidable. Even when you’re doing what you love and find it fulfilling, stress has a way of making itself known. It can stem from any source: family, business, technology, traffic, and so on. A lot of us end up working ourselves into mental and physical exhaustion, which compounds these stresses. We get up, work, go home, rinse, and repeat. Every day, people all over the country move one step closer to career burnout. The reason? They don’t deal with their stress. However, it doesn’t have to be this way. In an article published on Fast Company, Bryan Collins details a few ways to put the cynicism away, save your sanity, rediscover your passion, and stop burnout in its tracks. (Visit FastCompany.com/3038545 to read the whole article.) First, recognize yourself. Consider what you do every day. Look at your projects and your tasks. When you began your career, you may have been pursuing a passion, but businesses change over time. People change, goals change, colleagues move on, new managers are promoted, executives retire, and new businesses get started. With all of these changes, you may find yourself with a completely different set of responsibilities than you ever anticipated. If you’re not working on something you genuinely care about or are invested in, then you will eventually burn out. Refocus your efforts and recognize what it is you love doing. If you no longer have time to work on projects you care about, then make the time. If you need to shuffle things around so you can contribute in a way that makes you happy, then do it. Discuss reorganizing or delegating tasks and take charge of your workflow. Just remember to take it one step at a time. Make it a goal to find time every day to work on what you love, even if it’s just for an hour. That hour will make a world of difference in your state of mind. This line of thinking comes directly from psychologist Abraham Maslow (of Maslow’s hierarchy of needs). When you express yourself in a meaningful way – when you do what you love — you’re happy! You’ve achieved self-actualization, and that helps you to avoid burnout.
“Start With Why” teaches readers how to go about discovering their “why,” then instructs them how to effectively use that information to help their business. It also helps them unleash their business’s vast potential that has remained untapped until now.
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What Entrepreneurs (and Investors) Need to Have
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Cutting Costs in a Crisis
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HOW SMALL BUSINESSES ARE ADAPTING Cutting Costs in a Crisis
S mall businesses across the country are feeling the strain that comes with a global pandemic. Business models have been disrupted, and cash flows have taken massive hits. The coronavirus has left a lot of business owners and their employees scrambling. Regardless, in this tough time, there is one thing every business owner (and employee) should not do: panic. Panic causes far more problems than it solves. Panic is an emotional response, and when you make decisions — particularly business or financial decisions — based on emotion, you are more likely to make a mistake that negatively affects you in the long term. A recent Goldman Sachs survey of more than 1,500 small-business owners revealed that more than 50% believe they will be out of business within three months if the current situation doesn’t improve. In order to survive, cutting costs is
necessary. The biggest cost many businesses are addressing is labor.
Over the past few months, many businesses have let go of part or all of their staff, opting to lay them off rather than absorb the financial burden of keeping them on. Laying off workers can prove to be a good strategy, but only if done correctly. Start the process by extending invitations to your now-former employees to possibly return once your business can support them again. While they can now collect unemployment benefits, you need to think about where your business is going to be after this pandemic is resolved. At that point, you can do one of two things: Rehire previous staff or hire new staff. Keep in mind that hiring new staff members will cost significantly more than rehiring your old staff. Consider costs associated with retraining, establishing benefits, and getting them up to speed.
Also, do not discourage former employees from pursuing other options. While you may be in a position to rehire some of your prior staff, you may not have the budget to rehire them all. Everyone needs to be able to make ends meet. In the meantime, keep an eye on government relief. Many small businesses will qualify for certain assistance in the coming months.
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