5 Reasons You DO NOT Want an Investor

9
1760
5 reasons why you do not want an investor
Excel Spreadsheets

This post was motivated by the excess of entrepreneurs that I encounter on a day-to-day basis that have a strong tendency to focus efforts on attracting investors and which, in my opinion, runs away from the real needs of developing a business.

To expose the theme, I point out the 5 motives that I believe are pitfalls that you, as an entrepreneur, can not fall into!

Excel Spreadsheets

1. Money in the Hand is Gale

Paulinho da Viola was correct in that statement. Yesterday we had a talk at Casa LUZ where the case of a company that invested more than R $ 400.000,00 was presented and could not put the product on the market. "But why did they invest so much ?!", you may be thinking. They invested because they had to invest. This is the nature of man. What's more, the money made them run over, hiring a lot of people, officializing the structure that was in their business plan, buying the infrastructure they would have to manage, totally taking away what should be the focus. According to himself:

"We spent a lot of time managing a company that did not exist instead of investing time understanding our customer, which is the most important."

That is, the money at first was harmful to the company !! (Yes, read the sentence again)

2. Comfort (very) dangerous

It is common for entrepreneurs to take an "oba oba" stance when they get an investor. After all, they have many months of pro-labore guaranteed, the structure is paid for and, the most delicate: entrepreneurs believe that the (money from bidding, success in the incubation of the company, among others) are the guarantee of success of your business. Believe: the investor is betting on your business, he does not know if it will work or not. In fact, he probably understands very little of his market and selects companies using outdated methods (eg business plan), which in our opinion worsen the situation even more and dilute risk by investing in different companies. If a company of ten "bombs", it already receives the return on investment in all others. And what about the other 9 groups of entrepreneurs?

That is, remember that receiving a contribution does not make your business more or less profitable and does not guarantee that your idea has turned into a coherent business model that meets a specific demand with a viable product.

3. Wedding Rush

How long have you known your partner (s)? Did you choose fondly? Did you think about what each one would do and how it would add to the business? Have you worked / collaborated with them before? Do your partners know you? Do you know your goals? Are they aligned?

[newsletter titulo = 'Subscribe to our newsletter' texto = 'Receive free management tools every week!' discount = '10%']

And the investor? ...

What does he think? What does he like? What does he want with your business? What if at some point you need to spend more time with your family? Will he understand? How will it influence the dynamics of society?

It is undeniable that they bring professionalism to the business, because from the moment they invest money, they want return. It is important (and difficult) to align what he or she wants and how it influences what the founding members want.

Summary: Know your investor very well because you will more than marry him, you will share the helm of the boat.

4. Charging for unreal / wrong growth

The story is almost always the same:

1. You put in pretty numbers on the financial projection to impress the investor. He pretends to question, you pretend to have a good response and everyone is "aligned" with the partnership.

2. The numbers on the worksheet do not come true, so filling it with round numbers is easier than convincing someone to give you money for what you offer - the investor starts to get worried.

3. The pressure begins to fall on the partners. Where are the results? Where are the customers? Where are the new products? Will e-commerce go out ?!

4. Half the team despairs and the other half loses focus by trying to calm the rest.

5. Company Breakdown / Company Breakdown / Any other bad consequences

Summary of the story: you probably do not know the pace of growth of your company. How much will it cost 3 months from here? How many customers will you have? Will you be able to train your team to keep up with growth? What are you planning to do? Is it plausible growth? The most important thing in the coming months is to make a profit? Does the investor know that the numbers can be 10 times smaller? What will he do?

5. After all, why do you undertake?

What is success for you?

With each passing day I believe more in business that has a clear mission, a purpose, a proposal for solving a problem in society. Do you think the incredible things in the world were made purely for money? Was the lamp invented to generate money? And the iPad? The financial result is nothing more than the proof that you do your job well, it is not the end of the work itself.

Without entering into the merits of the economic system and its theories (after all this section is called "Inspire yourself" and not "Complicate") and linking to the subject of the day: Why are you looking for an investor? Does it help your business keep on trailing its course? It will help you generate even more benefit to society and your customers or just behind the money and pressure for results?

You mean I should close the door on any investor?

No! Far from it. We believe that they are important part of the life of some companies, but two points must be clear:

1. Money for what?

It is important that you remain clear among all the team where the contribution will be invested. What initiatives justify the entry of this amount of money into the company?

Test and prove these initiatives minimally. "We are going to invest in software development" and "we are going to develop the X module of software that has already had its tested features approved and already has 50 customers paying for its Beta version" are very different initiatives.

2. Who is this guy?

Literally, who is the investor? Does he believe in company values? Does he believe in the same future as you? In the direction you are taking? Does he understand where he's coming in? In short, Is it aligned?

Tip: this point appeared twice in the post and was not idle. After justifying the contribution it is very important that you bond with people who complement you and, unfortunately, it is not at a dinner that this happens, no matter how much we want.

And you, do you know any cases of success or failure with investors that you want to share? Did you find the relevant points? Are you looking for investors and do you think your future plans justify this contribution?

[newsletter titulo = 'Subscribe to our newsletter' texto = 'Receive free management tools every week!' discount = '10%']

Excel Spreadsheets

9 COMMENTS

  1. Hi Vilma!

    We were very, very happy with your comment. Come back and count on us!

    Any questions or suggestions, just talk.

    Bjs,

  2. Guilherme
    I find the comment very timely, I just have the impression that we need to create more actors in all these roles, whether investors, entrepreneurs, incubators I understand that the number of actors is very small and the size of our economy very large, we have to create more entrepreneurial culture ,

    I agree with your posts,
    hug
    Geraldo

  3. Forgive the little Portuguese errors, click the send button without reading the text again.

  4. Guilherme / Eduardo,

    Already getting into the subject, I see no reason for the canvas not to be used in other businesses other than the web / digital. The canvas is best for startups, precisely because it is lean, matching such initial uncertainty. I can say that I lost a lot of time attached to a business plan. This document creates almost an emotional bond, making difficult the pivoting necessary in the initial phase. We could only walk when we started again, and if I had not done BP so soon, I would have pivoted before. Business plan can be useful when the uncertainties are smaller and the guidelines more solid.

  5. Hello Carlos,

    You are absolutely right. The options are: to invest money that you have saved over time, to keep on working at least at the beginning (we have a talk here in the LUZ House about it, inclusive) or to look for an investor. The purpose of this post is to show the pitfalls of this latter option, not to say that they do not have a crucial role in developing new businesses.

    Thanks for the visit!

    Abs,

  6. Hi Guilherme,
    I agree with you when you say that a good idea does not need a lot of money, and perhaps almost none, to become a success or to be viable, but there is a time of development and gestation, during which entrepreneurs need to dedicate themselves to putting their ideas in practice, in the meantime, who pays the bills? And by accounts I mean the normal expenses of any person, house, food, etc.
    So, you need a little start-up money to go to an enterprise, or at least a job that allows you to keep and time to work in parallel.

  7. Hello Eduardo! I'm happy with your presence here on the blog.

    The COPPE Business Incubator is a great success case. We even have to thank you, because it is a source of learning and inspiration (like this post) for LUZ members.

    What I wanted to express in this post and in the excerpt copied in particular is that you go through any process is just the beginning of the next. For example: when we pass the entrance examination we are not yet graduated, right? The same goes for companies. If you have been incubated, congratulations! Now it's time to work FOR VALER.

    Regarding the selection and evaluation methods, the discussion is very long and depends very much on the context in which the investor / incubator / accelerator is inserted, so I believe it is only worth tweeting about it: how do you know the Osterwalder, lean start-up practiced to the letter and a lot of execution accelerate the learning process of the company, reduce the time and resources invested for the product to arrive in the market and, today, is the method that we at Luz more like. The challenge is to take this to non-digital business, especially the issue of scalability.

    I'm going to stay here despite being very tempted to keep talking about it!

    Strong hug,

  8. Good morning Guilherme, Good morning Luz Consultoria,
    It does not surprise me a lot, but it is at least strange that you (or you from Luz Consultoria) are suppliers of an institution that since 1994 has several success stories of technology-based startups and that uses and will continue to use "Business Plans" Similarly, we do not believe that only a Lean Startup model can support all types of business.
    As you yourself say: what is success? - success are more than 50 graduate companies, 16 residents, more than 700 highly skilled jobs, tax payments far outweigh the amounts invested in the Incubator in recent years.

    Good luck! Here is the transcript that left me worried:
    "It is common for entrepreneurs to take an" oba oba "stance when they get an investor. After all, they have many months of pro-labore guaranteed, the structure is paid for and, the most delicate: entrepreneurs believe that the screening of investors (money from notices, success in incubating the company, among others) are the guarantee of success of your business. Believe: the investor is betting on your business, he does not know if it will work or not. In fact, he probably understands very little of his market and selects companies using outdated methods (eg business plan), which in our opinion worsen the situation even more and dilute risk by investing in different companies. If a company of ten "bombs", it already receives the return on investment in all others. And what about the other 9 groups of entrepreneurs? "

LEAVE AN ANSWER

Please, write your comment
Please enter your name