Do you have a billion-dollar idea? Is it something you want to spend the next ten years of your life doing, getting gray hairs (and possibly losing some or all of your hair), not seeing much of your friends and family, not sleeping, even though you will most likely fail? If you can answer with a resounding “Yes!” and still be pumped up about your idea and its future potential, that’s a good start.
Your confidence in yourself will be tested unlike anything you’ve ever experienced before. At the start, your idea will not work. Period. You will have to change it and tweak things. You’ll never get it right on the first try. To put it in perspective, it took Elon Musk four rocket launches and close to half a billion dollars before Space X got it right.
Most early and seed stage investors will never read an entire business plan. However, a business plan is still a great exercise for you to do when starting out. But it doesn’t end there. You should keep rethinking it throughout your company’s evolution. This exercise forces you to work through all the different facets of your business. You won’t know all the answers, but you’ll have to use your logic and decision-making abilities to find the appropriate course of action. This is a valuable exercise for your own planning purposes and leading up to Step #3. There are a lot of business-model canvases available on the Internet or sample business-plan writing guides. If you want a platform-specific business-model canvas, you can use ours here.
This is the real meat and potatoes. You can raise $200-500k with less than 12 slides. With conviction and a well-thought-out platform business, you can raise enough funds from family and friends to get your business off the ground. Remember, investors are busy – they don’t have time to read through a 10+-page business plan. You should be able to convey your vision, product, market validation and financial projections/model within 10 slides, but definitely no more than 12.
Spend a lot of time on this exercise and then talk to yourself in the mirror practicing the pitch and your talking points. You only have a few minutes to really get someone’s attention, so make it count.
Incorporate your company and find a lawyer that can help you with your offering documents. Depending upon your cash situation, there are many lawyers that will do work up front or do work in exchange for equity. I prefer to not give up equity this early in the game, but it’s your call.
Next, you need to find a lead investor who is willing to kick off your investment round. This will usually be someone close to you. Right now, there is nothing in the company except for you. This person is really investing in their belief in you and your ability to grow a successful company. The positioning of the company and vision are important, but think of those more as mental exercises to take the lead investor through so that they can understand your logic. If they can’t understand how you think and approach the market then they’ll run away.
With this person, agree on the terms of the round and draft up those terms with your lawyer. Your lawyer should also be advising you on the terms and what’s considered “market.”
Now, you have your deck, your round kicked off and it’s time to close the round. This is where the rubber hits the road. Hunker down, make a list of people that you know who could invest or who know others who could invest. Call them all. Don’t fear rejection. Believe me, it’ll come. Embrace it and know that it’s their loss if they don’t get involved. They’ll be more opportunities for them to get involved in the future – it’ll just be way more expensive for them to do so.
What does this mean?
Don’t start raising a round in November with the holidays right around the corner. If you don’t close your round by mid-to-late November, you’ll have to start all over again in the new year. Closing out a round depends a lot on your momentum. Give yourself enough runway for the momentum to continue to build, and it’ll only make your success come faster.
The hard work isn’t over. When you’re building your own business, it never is. That’s one big fact that I’ve learned from founding Applico and from working and talking with thousands of entrepreneurs at all different stages of growth. But if you’re passionate about your business, the satisfaction you’ll get from seeing your idea evolve and grow is more than worth it.
Need help making your idea a reality? We can help. Get in touch.
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