The Debate
I’ve worked for many years helping entrepreneurs prepare for the capital raising process. I’ve seen angel investors, venture capitalists, and trade associations strongly recommend that you should not hire people to help with your financial projections and business plans. Obviously, I disagree with this recommendation, but I believe there are several basic principles that apply to entrepreneurs trying to raise money that we should all be able agree on, leading to mutually beneficial coexistence.
The Issues
If you hire someone to do everything for you, you won’t get the benefit of learning your finances and business model inside and out.
If you don’t have much experience with financial modeling, spreadsheets, business planning, writing, and experience in raising capital, it can take a tremendous amount of time and effort to get it right.
A lengthy learning curve can be very costly to you, as you spend less time in activities that can generate revenue and profit, and more time developing expertise in the capitalization process. In my experience, even those who have done it multiple times often rely on help from others.
If your business has the potential to get funded by angel groups or venture capitalists, your preparations better be right on the mark, or your deal will probably not pass the screening process. This is very difficult to do, especially if you’ve never done it before. It’s like trying to hit a home run in your first at bat in the major leagues.
A collaborative effort between entrepreneurs and experts in the capital raising process can overcome all these challenges. This approach has been proven to work effectively time and time again.
Elements of Effective Collaboration
In an effective collaboration:
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An expert walks through all the “nitty-gritty” details of a business with the entrepreneur, discussing ideas, strategies, tactics, plans, opportunities, weaknesses, and many other issues.
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The expert coaches the entrepreneur, and helps identify solutions to challenges and pitfalls to that specific business, which result in better projections and stronger business plans.
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The expert provides qualitative feedback on the information provided by the entrepreneur, something that does not come from books, websites, videos, or software.
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The expert works “side by side” with the entrepreneur to develop a comprehensive financial model and business plan, which are highly customized to each business.
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At the end of the collaborative process, the entrepreneur has been intensively schooled and tooled in preparation to raise capital.
If any of these elements is missing at the end, then the collaboration has not been fully effective. If the expert does all the work, then the collaboration has not been effective, and the end result is an unprepared entrepreneur. Intelligent investors will be quick to recognize the lack of preparation, and won’t invest.
Entrepreneurs:
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You do have to pay the price to get correctly prepared.
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You don’t have to do it alone, you just have to do it right.
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An effective collaboration is a proven, viable way to do it right.
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An effective collaboration can save you a tremendous amount of time and money.
A smart man learns from his own mistakes.
A wise man learns from the mistakes of others.
A fool learns from neither.
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