PROJECT OWNER MINDSET

Magister Operis™ receives numerous requests for various funding. The requests range from project funding to start-up (seed) capital to venture capital for already established businesses seeking to move to the next level.  

It is critcal that you understand the criteria that venture capital firms, intitutional investors, and experienced investors use to decide which companies to fund. If you are unwilling to pay close attention to these criteria then stop reading this page and click here.

Very few business plans present ideas that are truly unique. It is very common for investors to see multiple versions of the same idea over the course of a few months, and then again after a few years. What makes an idea compelling to an investor is something that reflects a deep understanding of a big problem or opportunity, and offers an elegant solution. This is the starting point for getting venture investors interested, but it is not sufficient to have them invest in anything. The idea alone does not make you fundable. You have to possess the rest of the ingredients below.

You may have a great idea, but if you don’t have a strong core team, investors aren’t going to be willing to release funds towards your company. This doesn’t mean you need to have a complete, world-class, all-gaps-filled team. But the founders have to have the credibility to launch the company and attract the world-class talent that is needed to fill the gaps.

Be very careful not to fill the gaps in your management with parties that are not really qualified for the job. A chief executive officer (CEO) is the voice of your company and needs to really have the passion and marketing skills to represent your busines. Your chief financial officer (CFO) really needs to be able to evidence competency with industry targeted financals, spreadsheets, and reasonable and skilled proforma projections for your company's future.  

Please understand that winning over investors (and customers and co-workers) depends on your people skills as well as communication skills, not just your technical skills. Also understand that if parties within your managment are not competent and/or experienced within their postition, it is not uncommon for investors to demand that unqualified parties be replaced with parties that are truly competent for the specific critical function. 

A powerful book that all key exectutives should read and understand is Michael Gerber's book: The E-Myth

Venture capital is focused on businesses that gain a competitive edge and generate rapid growth through technological and other advantages. If you are focused on technology, you should be targeting a sector that is not already crowded, where there is a significant problem that needs to be solved, or an opportunity that has not been exploited, and where your solution will create substantial value. Contrary to popular belief, it’s not about how big the market is; it’s about how much value you can create. Brilliant new companies create big markets, not the other way around.

What makes your product so great? The correct answer is, there are plenty of customers with plenty of money that desperately need it or want it. Not, there are some people with no money who think it’s cool. Assuming you have a quality, availability, and/or price advantage right now... how are you going to sustain that advantage over the next several years? Patents or just a product source alone won’t do it. You better have the talent or the partners to assure investors that you are going to stay ahead of the curve.

Every interesting business has real competition. Competition is not just about direct competitors. It includes alternatives, “good enough” solutions, and the status quo. You need to convince investors that you have advantages that address all these forms of competition, and that you can sustain these advantages over several years. A few years ago entrepreneurs could get away with saying that “competition validates my solution,” but today that’s not good enough. Moreover, you have to show that you have a good way to reach your target customers and beat out your competitors. As a friend of mine has said, it’s not good enough to build a better mousetrap; you have to really want to kill mice.

If the idea of developing credible financial projections makes you wince or wail, or if you think it’s a meaningless exercise, you are not an entrepreneur and you shouldn’t ask investors for money. Your projections demonstrate that you understand the economics of your business. They should tell your story in numbers—what drives your growth, what drives your profit, and how your company will evolve over the next several years.

Probably the most important factor influencing investors is validation. Is there good evidence that your solution will be purchased by your target customers? Do you have an advisory board of credible industry experts? Do you have a co-development partner within the industry? Do you have beta customers to whom investors can speak? Do you already have paying customers? What other brand name validators can you offer? The more credibility and customer traction you have, the more likely investors are going to be interested.

8. Execution

To secure venture funding today, you need an excellent grade in all seven areas, and an A+ in at least a couple. It’s a tough environment out there, so don’t waste your time with a story that is not compelling and credible.