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You need to possess the skills of a ninja, James Bond and Captain America all in one if you want to win and get ahead in today’s competitive world. That’s a bit of an exaggeration, but you know what I mean. You have to be able to maximize shareholder value without compromising the mission and ethical and moral values of your organization. I offer my insights based on my experiences with dozens of unique projects, disruptive startups and influential large companies in over 60 countries around the world.
There are three pillars of attracting diverse financing sources while building a lean startup primed for hyper-growth:
1. Focus on removing risk and creating equity value from the beginning while proving your business model on a small scale with strategically valuable players.
It pays big to see the big picture, but it pays faster if you can start with small successes in the early days. Do not try to build the best product or service as your first goal. Rather, focus on being the best in two or three aspects of the most desirable features of what the market is asking for, not just what you and your team think is best.
2. Select well-established vendors with strategic value that, in addition to scalability, can offer expertise, networking and reasonable rates.
Find people who share your vision and are willing to help you grow and not just roll corporate policies in front of you. Think of them as one of your departments, closely working with you on a daily and weekly basis so they know how you are progressing and where you need their help the most. This way, you can significantly reduce your overhead and still work with some of the best experts in the industry who do not rely on your business alone to stay ahead.
3. Sizable commercial bank lending is unavailable for most startups.
Seek all finance options as early as possible, from angel and venture capital investors to intellectual property asset lenders and investment banks. Prepare a set of documents tailored for each audience and transaction, making them quickly and easily updatable with smart digital content management. Get the best tools and apps available on the market, but don’t spend big on too many features, regardless of how attractive they sound. Select the most important things you need to reach your next milestones, and minimize equity dilution and maximize value creation by removing risks. Attack those risks on a daily basis.
I launched one of my group’s existing companies in the healthcare field. Our small team had to come up with the unusual start for any biotech; we had to find the shortest way to generate revenue from product sales without FDA approval while improving equity valuation so investors would find the deal attractive, not just for the technology or the large market potential, but for how we demonstrated execution of our own plans. An amazing hypothetical value proposition is just that: hypothetical. Financing sources want to review historical data standing on strong legs that are growing. I know that is hard for a startup to obtain, but that must be your first mission after your grand vision.
The more benefits you claim, the fewer people are willing to believe your business and your tech can execute on all of them, so you’ll need to obtain more proof, which usually takes more time and resources. Our opportunity only grew as we learned more. This may sound like a great problem to have, but it makes it difficult to explain effectively without sounding like a snake oil salesperson. If that’s your situation, how do you focus on your best possible option in terms of funding and commercial results? The answer is to develop several backup plans. Most theories fail the test of practical application, and if you just try to pivot on the go, you forfeit your advantage against your competitors. Giving up this advantage can even lead to the sudden death of your company if you run out of money too soon or you simply cannot reach your goals. Tesla and its many troubles provide an example of this type of challenge.
In our case, massive advances in diagnostics and clinical trials have emerged during the past decade to further cement the need for our product. Without these advances, it would be much more difficult to fund and develop our startup, and we probably would have gone out of business due to the exorbitant costs of standard clinical trials. The lesson here is that you have to position your company for the world to catch up around you, and you must be ready to act at any moment.
July 9, 2019 at 08:06AM
Forbes – Entrepreneurs