Plan for the Worst, Pray for the Best
An investor offers five tips for entrepreneurs seeking investment right now.
My good friend Michael Movitz asked me what suggestions I might offer emerging brands planning to raise capital in the coming months. As an investor I want to put money into promising change-the-world companies, so I jumped at Michael’s suggestion and cut a short eight-minute video with some ideas for what founders should be doing right now.
Let me offer a quick summary of the key takeaways.
First, understand where the investors’ heads are. If I’m a private equity firm or venture capitalist, my approach is going to be guided by three things:
Caution & Patience: Investors are likely to be overly cautious for the next couple of months or so as we all see just how bad things are going to get. Investors will be taking a deep breath and practicing patience, which is tough because most investors out there still have money on the sidelines (“dry powder”) that they want to see invested at some point.
Intentionality: Investors are going to practice even more due diligence than usual. I’m helping a very large private equity firm right now through some diligence, and I’ve asked them about this. They emphasized that while there’s tons of money in the market waiting to be invested, it will be important to get a read on the overall market before jumping in too soon. I think we will have more clarity on this in the next 2–8 weeks.
Given his scenario, here are the five things entrepreneurs/founders should focus on that will show investors, as well as your team and your customers, that you’re in business for the long run:
If you already have an investor, show that you’re taking it seriously, i.e., that you’re planning for the worst, while praying for the best. Conserve cash by putting new hirings and new product launches on hold for a couple of months. Work with your supply chain to stock up for two to three months longer than usual.
Focus. Really zoom in on what your wildly important goal is for 2–3 months. It’s the one thing that if you do it, you will persevere.
Over-communicate to your stakeholders to calm their nerves and give them confidence that you have it under control.
Consider making offers that make it easy for your consumers to support you. Gift cards? Subscriptions?
Take any enforced downtime to revisit your strategy and nail it down if you haven’t already done so. Quick plug: We’ve started an online “club” that offers a 12-week “Nail Your Strategy” program for early-stage entrepreneurs.
I can’t emphasize enough how important it is to take care of yourself and to stay as energized as possible during this difficult time. Your team looks to you to “be the calm” during the storm. I would also like to recommend this article by McKinsey, the best article I have seen on tactical considerations for businesses during this time.
If you have any questions, please feel free to reach out to me directly.
Sincerely,
Rob Craven, scalepassion
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!