BabyAlpha

If you are fundraising for a new business venture, we’d like to save you some time and rightsize expectations. Fundraising is very time consuming, requires careful attention to detail and many of the people you talk to are going to waste your time. You should assume there are no shortcuts, no white knights and no magic tricks to a fast easy fundraise. The average fundraising cycle in our experience is nine months. That’s nine months of business plan development, lead prospecting, pitching, reorganizing and doing it all again until you start to get traction with qualified prospects.  For any investor to come aboard your venture, there are three major hurdles: (1) they need to believe in your business plan and possibly know your industry better than you, (2) they need to trust you and (3) they need to have both the capital to invest and the spine to get in the game. Knowing these hurdles, the next step is creating a target prospect list and classifying the investor types.

Your friends and family may have the money and they may trust you but not have the industry experience. Industry veterans may know your industry better than you and have the capital to invest but may not know you hence no longstanding basis for trust. “Rich people” tend to look qualified but not have industry experience, not have a history with you from which to trust and often times don’t really have the capital to invest since they aren’t really “rich.” First thing we recommend you do is create a sort-able spreadsheet list of (1) friends, family and former co-workers, (2) industry veterans and (3) the alleged rich. Try and create a list of 10 to 100 prospects. Excel or Google spreadsheets are a great tool for this and here is a sample of what your list might look like. You should expect to have to ask/pitch 100 times before you start to get real interest in your venture. Why so much? The early iterations of your pitch probably suck and this is a numbers game, pitch more people, statistically improve chances of a “yes.” Lets delve into more descriptive information about each of these three groups as this profiling will be important to your fundraising efficacy.

Friends, Family & Former Co-workers
This first group are people who know and trust you and write the check exactly for that reason. These are usually people you have known you for 5 to 10 years or more. Depending on their business sophistication, you may get checks written based on an idea on a napkin or you may need an exhaustive business plan with full financial forecasts. Bottom line: for this group to invest in you, it comes down to their history with you and trust.

Industry Veterans
This second group are people who know your industry better than you. In fact, if they invest in your venture, there is a high likelihood they’ll have an authoritative role on the Board of Directors or as a participant of the Management Team. Its smart for entrepreneurs to surround themselves with people who have already stepped in the holes that they are about to step in themselves. Industry veterans are pretty easy to identify with a few Google searches if they have had press worthy success. In a future post I will detail other specific techniques you can use to identify these targets as well as how to get introduced and enthralled into a meaningful dialogue.

The Alleged Rich
This third group are people that do not know you that well, or at all, and they have no experience in your industry. Somehow you heard about them or got introduced to them primarily because “they have money.” Its very important you understand the criteria outlined here so you can know these guys when you see them. Be careful, because this is the group that can seductively waste a great deal of your time. Why? They look sexy, maybe live in a big swanky house and have a few expensive cars but they run you around in circles, yet they never write the check. They take pleasure in being the King of your court telling you to “jump” and you naively responding “how high”? They will even advise you on your business yet they have no experience to support their opinions. And often times, these guys have no money. Knowing how to spot this group will save you incredible amounts of time.  In my experience, this investor prospect group almost never writes the check.

In our experience, you should focus on friends, family, former co-workers and industry veterans as top priority. For the alleged rich are great at wasting your time. Be present to the type of investor you are talking too and what motivates them. Did I mention alleged rich can waste your time? Theirs is ego driven and that’s dangerous for the entrepreneur with little time to spare. Once you get to know the profile of these investor types, you can be fast to disqualify prospects and narrow your focus to prospects that can truly help your agenda. Its important to be in a mindset of trying to disqualify leads rather than qualify. Yes this goes right in the face of positive thinking but the problem is we want to be successful, we want to believe in a prospect and many look qualified but this makes us blind. Most people are not good at delivering rejection, including prospective investors, so you must be conscious to signs of lacking interest and look to confirm. The more you can pitch and the faster you can do it, the better your chances of positive results.

This is Part 3 of 3 in a discussion on Venture Branding. We know a key question that arises in the early days of a new venture is “what should we call ourselves or our product?” Answering this question requires a different approach for a multimillion dollar revenue company vs. a startup with no track record. This post focuses on the startups.

For the startup, answering this question can be very daunting, and could quite frankly waste time that would be better used for business execution or product development. My recommendation for startups is that a long debate over functional vs. abstract or exhaustively analyzing options is mostly a waste of your valuable time. As a new, or even experienced, entrepreneur, you have considerable work ahead of you, and it’s far more work than you will have time for.  Don’t get caught up in analysis paralysis. Give yourself a reasonable deadline to research and explore options, then pick something that’s important to you. No matter what you decide, it will likely have no significant meaning to your target audience when you launch. Your brand will (and should) be defined by the quality of the proposition you deliver, not whatever label you attach to it.

Along the way, you are going to be told its “absolutely critical” to carefully plan your brand right out of the gate. But is it really that critical? What about BackRub that ultimately became Google? And Datsun that became Nissan? Do you know where Grey Goose founder Sydney Frank got the name for his new spirit? It has nothing to do with geese or France. He bought the Grey Goose wine brand and figured since he already had the trademarks worldwide that this would save him some time naming his new vodka.

There is a great body of academic study devoted to brand design and redesign but be careful not to get too bogged down as new venture entrepreneurs run the risk of spending too much time on catchy names and logos vs the basic blocking and tackling of execution. Yes, there are times when deep, thoughtful analysis about a brand’s design, or even the hiring of a brand architect, makes a lot of sense. But before you have built your product may not be one of those times. Find something you love quickly, even bounce the idea off of friends or experts, but trust your heart. If you are spending three or four weeks in a dedicated manner on this topic, the cost is probably exceeding the benefit. Make a choice and get back to product development and execution ASAP. Tick tock.

This is Part 2 of 3 in a discussion on Venture Branding. Gatorade’s story originated at the University of Florida, Google’s story originated from a mathematical reference. Before it was called Google, founders Larry Page and Sergey Brin originally named their search engine “BackRub”, because the system checked backlinks to estimate the importance of a website. Apple’s story allegedly originated from a combination of Steve Job’s farm experience and his music tastes, namely the Beatles and their Apple Music label. For Grey Goose vodka, there was no beautiful meaning and no expensive branding consultants. This brand choice had nothing to do with winged creatures or France where the vodka was distilled. Rather Grey Goose creator Sydney Frank already owned the brand name via a prior acquisition of a German wine as well as had the brand trademarks registered throughout most of the world. He figured rather than trying to come up with something new and to pay to register it, that Grey Goose would be as good a name as any and that it rolled off the tongue nicely. At the time most people hated the name and did not believe it would be successful. In 2002 Bacardi bought the Grey Goose brand for $2.4 billion. For another entertaining brand story, check out Crystal Skull Vodka. Its all fiction but damn it sure sounds good.

This is Part 1 of 3 in a discussion on Venture Branding. What did “Google” and “Yahoo!” mean to lay-consumers the very first day those businesses launched? Absolutely nothing. How about Grey Goose? Or Nike? Again nothing. In this post we highlight a distinction for entrepreneurs between functional and abstract branding. The difference to note lies in brands that literally say what they do vs. brands that evoke some sort of broader, abstract imagery. The following are worthwhile examples of the distinction between functional and abstract branding:

• The Coffee Bean & Tea Leaf (1963) vs. Starbucks (1971)
• Vitamin Water (2000) vs. Gatorade (1965)

In the named examples, its easy to see both functional and abstract can work. But if you go back to the year these companies started, can you imagine the debate over what name was right or not?

A benefit of functional naming is that people get what you do with little or no marketing (read: might save you $$$ trying to communicate to customers), while abstract naming evokes something bigger and allows room for brand growth (read: maybe more catchy now, more flexible to build on later). Often we see brands begin as a hybrid the two, ultimately evolving to just abstract e.g. Apple Computers (1976) to Apple (today), or McDonald’s Hamburgers (1940) to just McDonald’s. Even Starbucks was an evolution as it originated as “Starbucks Coffee, Tea, Spices.”