Money Isn’t Evertything: My Recent Experience Raising Private Equity

Written By Ben Rao, Community Buying Group

As untold numbers of entrepreneurs will painfully attest, the process of raising investment capital can be daunting, if not outright scary. I found that one of the most overlooked strategies in this process is to not focus on the money, but on the total solution provided by a potential investment partner.

We know we need the money, we have elaborate business plans showing how it will be
used, and we are enthusiastically ready to tell our compelling story in competitive pursuit of “show me the money.” In reality, finding the right strategic fit should be the priority, and the funding will invariably follow.

Another way to look at it is that the money is the common denominator. It all spends the same. But the level of real help, collaboration, understanding and support is not and can be a huge game changer, even a multiplier for growing your business.

More Than Capital

I recently had the experience of presenting to angel groups and private investors to find a financial partner to help fund Community Buying Group’s next level of growth. As a result, I found an investor who brought me far more than needed capital. They brought me customers and provided additional resources to be a sounding board to bounce ideas off of and to challenge my direction. My advice is to really get to know your potential investors and find one who can provide a strategic benefit in your niche. Whether it’s industry knowledge, complementary products or services, or access to their existing customer base, you will find this to be of significant added value to your success. The investment that comes along is a bonus.

Be ready to illustrate that you can provide a reciprocal value to that investor, in addition to a big return on their money. Maybe you can help them grow their own business or contribute to an industry or a community at large. This will open the door to a much broader spectrum of potential investors. Use your local resources to help identify these sources. I found so many resources in my own backyard that were willing to help mentor or make introductions to someone else, and the only cost was the time I invested to network and build relationships. Between the Lee’s Summit Economic Development Council (EDC), the BOOST Lee’s Summit network and the Lead Ventures mentoring program, I received a lot of help in extending my investment search.

Keep It Simple, Show Value

For example, Lead Ventures helped me review my go-to-market model, business plan and pro forma and even worked with me in presenting to angels. By the time I actually found my investor, I had scrubbed the model and pro forma so much that I knew it inside and out. As an entrepreneur, I am really passionate about anything I work on. Some of the best advice I received was to keep it simple or you’ll lose your audience on the first meeting. That was hard, because I was just so excited to tell them how great our company was. But finally the light bulb came on, and I learned to keep it simple and have the facts to back it up, but only use them if needed for clarification.

Most importantly, determine what’s in it for them. Identify what you can do for the investor. As I began to really see what I could provide to investors, prospective partners or other strategic alliances, it became clear. Find the right partner, and the money will follow. Sounds easy, but of course, it requires time, discipline and focus to look beyond the capital you need. There are a lot of smart, wealthy people who are off the grid from an angel or private investment perspective. They are often in a related business where a part of their growth strategy is to invest in other companies that bring something to the party.

One of the best ways to find them is by becoming an expert in your industry, networking and really paying attention to who else has a complementary product or relationship with your prospective customer. Start by making a list of everyone who sells something to your customer: products, services, support—nothing is off limits). Then remove the companies that compete with you or just don’t make sense. Really dig into the remaining companies to understand how they go to market, how many customers they have, how they got started and what you can do to help them boost profits or provide additional value to their customers. Start figuring out who you know that knows someone at those companies. If one of your customers is already doing business with them, get introduced.

Finally, make sure your social networking profiles are up to date and professional, especially Facebook. You don’t want a prospective investor or partner to see a photo of you from a party where people wrote on your face with a Sharpie. And take advantage of LinkedIn to locate people you know who also have contacts in the companies you want to research and gain access to. With the proper amount of due diligence and creative thought process, you will find a long-term strategic partner that can not only help fund your growth, but provide value far greater than a cash investment. And don’t give up! That partner is out there and closer than you think.