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Reach out to small business owners like you: Advertising solutions for small business owners

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Go beyond just a "great story": Investors want to make money, so show them the money!

  • Thanks to The JOBS Act, and the advent of blockchain technology it has never been easier to raise virtually unlimited funds for one's startup these days.

  • Going on and on about some life-changing event that happened to motivate you to start your company is awesome.

  • How you get folks to open up their pocketbooks though? Tell them how this thing of yours can make money and your plan to build a real, self-sustaining company.

There is a bit of an alarming trend developing, I have noticed: Folks throwing investment dollars at startups simply because the founder(s) tells a moving story.

I don't think there is any real, solid data out there to back this statement up but I just get this feeling, being a private investor myself and the fact that I opt to spend an unhealthy amount of time on many of the equity crowdfunding sites out there.

Hey! Don't judge me. You have Youtube and Facebook, I have Republic.

Everyone has a story to tell. Some emotionally gripping tale behind the reason their company came to be. Some event, or series of events, that occurred, pushing them to take the leap of faith and go ahead and launch their startup.

Watch any episode of the hit CNBC show, Shark Tank, and you will bear witness to these kinds of stories. These types of stories that have propelled many Americans, and people all over the world, to start great companies. There is a unique, greatly appreciated, personal, inspiring story behind almost every company.

Even the large "greedy" ones:

Sam Walton, founder of Walmart and Sam's Club, famously purchased his first store, a (franchise) Ben Franklin variety store at the age of 26 after leaving the military. He did so with a $20,000 loan from his father-in-law and $5k he had saved up from his service days.

Small-dollar donation

Entrepreneurs though, I have noticed over the years, get very caught up in these types of passion-driven, emotional stories. A significant percentage of those who go into business for the first time, in my opinion, tend to substitute a great story for a product or service that solves real problems.

The kind of products or services that folks need and/or want. Ones with real-world value. Even worse, when pitching their startup to professional investors- the kind of folks who are in it mostly for the money - entrepreneurs tend to miscommunicate the palatable aspects of their business, opting instead to focus more on telling "a great story".

Sure, laying out an awesome origin story sounds great and may even motivate the average investor to open their wallets and help fund your business. With so many crowd equity funding platforms out there, it is super easy to get the "retail investor" to whip out their credit card and send a few dollars your way via Wefunder or Republic.

Thanks to The JOBS Act, and the advent of blockchain technology it has never been easier to raise virtually unlimited funds for one's startup these days.

I have noticed though that those types of startups that have no products or services with real value, even after raising hundreds of thousands of dollars, even millions quickly blow through their cash only to come back to a lackluster reception from the same crowd that helped fund them the first time around.

In these tough economic times, it is important, to me at least, that startup-ers consider these three points when pitching their companies to investors-even retail investors:

Product, system, sales

If you have ever read any of my stuff - and if you have, I am deeply sorry - then you know that I am forever a sales (and marketing) guy.

To me, there really is no substitute for spending dollars to tell as many people in your target audience as you can about your products and services, and how they can benefit them.

Telling a compelling and demonstrable story/plan as to how you intend to power an already-existing, or potential sales and marketing plan will go a long way to not only get investors to hand over their cash but to also build a real business.

Of course, before we even think about sales and marketing, we must develop a viable product. Here is where things can be more art than science. I am a very technical guy so I tend to focus more on products and services that solve real-life problems.

The ones that address needs, specifically in business, more than wants. To me, a service like Foody - at first glance -makes no sense, but I am sure even they have loyal (paying) customers: The type of folks who will pay for recipes even though, for the most part, recipes are free almost everywhere else online.

For these reasons, I will not be arrogant enough to try to tell you which specific type of products or services folks will pay for. That will be a mistake.

What I will tell you is that you probably want to know exactly who these folks are that are willing to pay for (or already paying for) your offering, why they pay for your stuff, and how to make your product more attractive to them, and how to incorporate, within your marketing systems, the aspects of your product that benefit your audience the most.

Hold your thought, I'll take the cash.

Starting a business is scary for many reasons. Most folks fear failure for what type of havoc "not getting it right" will reak on their personal finances. So what is there to fear when you have a pocket full of cash (from your last funding round)? Quite a bit.

Most entrepreneurs see the lack of access to cash as their only obstacle on the road to success. This is far from the case. There are many-many other roadblocks, and the one I find folks overlook the most is experience/expertise.

If you are raising money (for the first time) to start a business, you should be on the lookout for folks with the relevant experience and expertise to help you build your business - as much as folks with the funds to invest. And here is a secret: More often than not, your investor and "guy or gal who can help you build this business" is the same person.

As an investor and entrepreneur, I can tell you that it is always a red flag when an entrepreneur seeking funds tells me that one of the requirements of helping to fund their business is that I do not give any input or weigh in on anything relating to the day-to-day of the business.

Not realizing that I or any other entrepreneur-investor probably has the relevant skills and motivation to help grow the business. Or at least, point them in the direction of an associate who does.

Let's be honest! Unusually, it's ego, right? And that is an even redder flag.

One and done

Love like you have never loved before, dance like there is no one watching, and raise funds for your startup like this will be your first and last time.

What does this mean? Well, since many things have to align just right to give you the opportunity to raise the funds you need to go out and build/grow your business, I would encourage that you plan to get to Profitability or at the very least, Positive cash flow with your first round. I say this being fully aware that some businesses require multiple rounds to get to the point where the business is "making money".

Is it possible that you will have to come back to raise more cash? Sure! More than likely. But if you plan to get where you need to with $100k, or $200k, you will either come back with a business that just needs a bit of a nudge to get to profitability and will have shown investors that you understand the need for operating a cash-efficient business.

If you are lucky and skilled enough to get to profitability with your first round, and even decide on a second or third round for marketing or product development, you will be able to command a much higher valuation than you did before. Not to mention, you will have made your seed investors very happy.

P.S: I am sure you already know this but please come up with an honest, viable exit plan. Whether it is a sale, IPO, or whatever, and communicate your track record and ability to do so throughout all of your investor presentations.



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