September 24, 2008

Borrowing Credibility

Would you loan money to this guy?  Neither would I.  Unfortunately this is how a lot of small business owners look when they go hunting for business capital.  The business may have an excellent product, wonderful sales projections and perfect pro forma’s and still not find a suitor.  CEO’s often scratch their head trying to figure out where they are going wrong.  The truth is they may be lacking credibility.

Investors are a skittish bunch by nature.  You would be too if you had been torched out of huge sums of money over the years.  For every home run an investor funds, they will likely tell you of 7-8 failures that have cost them a mint.

The commonality among winners and losers is how each started the process.  *cue Chariots of Fire music*  Both brought big hopes and ideas to the investors table.   With a burning desire deep within the soul, they knew without a doubt that they were going to be the next Microsoft.  All of them stood tall with hands on hips, overlooking their little fiefdom and dreamed BIG, sometimes pondering how they could run this juggernaut of an industry and still find time to fit the Oprah interview into the schedule.  Visions, yes actual REAL VISIONS of sugar plumbs danced in their heads!

The statistical reality is that only half of these companies will still be in business after five years.  So to counter this statistic, one of the elements that investors look for is your credibility.  If you are trying to start a business with your college roommate, forget it.  An investor isn’t interested in paying your “University of Hard Knocks” tuition… it’s VERY expensive  The simple fact is that there are too many established businesses available to investors, ones with historical performance, proven revenues and lots of traction.  So what can you and your roommate “Kegger” do to get some respect?  Form an advisory board.

A Board of Advisers offers a number of strategic advantages that include

*  Industry Experts who are serious about your success

*  Years of experience from Wiley veterans who have traversed your path before

*  An instant networking hub that can leverage and introduce strategic partners

*  A group of people to whom you must be accountable to

*  Instant credibility

Funding Universe suggests inviting the following qualified people into your inner circle.  An industry guru, accountant, lawyer, established businessman and a distribution/sales agent.  A diverse group of individuals such as these provide rich resources of knowledge, networking and growth opportunities. So if your business is struggling and you can’t seem to get the respect that you deserve, consider trading in your pocket protector and taped-horned-rim glasses for a board of advisers.  It just might get you funded!

Joel Nielsen is a Venture Consultant for Funding Universe and can be contacted at jnielsen@fundinguniverse.com