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10 Ways You Will Screw-Up Raising Capital & Tank The Deal
Whether you are looking for an investor or a new customer, I think there are very clear reasons why someone will not invest in your brand. Having been fortunate (and unfortunate) enough to be on both sides of the table, and also being fortunate (and unfortunate) enough to succeed (and fail) at raising capital on multiple occasions, hopefully this will shed a bit of light on some of the prevalent mistakes people make when entering the investment waters for the first time.
To those of you who are at it again after swinging and missing in the past, first, let me say ‘kudos to you’ for continuing to preach on. Remember, we only fail if we quit. Here are some things you may have been doing wrong in the past that may help give you a better insight into what to do right to get you pointed in the right direction and hopefully swing the percentages over to your side of the table.
1) The Message Of Your Brand Conflicts With The Message Of You
I believe there is no way to separate a person from his or her brand. I have found that a seasoned, sophisticated investor always finds a necessity to get to know who they are getting into bed with. There is always a reason why someone hides behind his or her brand and none of the reasons I have found are good ones.
You and your brand must be fully in sync and convey the same message. Steve Jobs message was complete, easy-to-use hardware integration. Sam Walton was as much a penny-pincher in his own life as his stores are today. You would expect Wal Mart’s offices to be rather plush given the behemoth that it is, however it is quite the opposite. No lavish offices, no lavish expense accounts, everything exemplifies The Wal Mart way. Sam Walton wouldn’t have it any other way.
2) You are not fun to deal with
Within a few years into our first business, Gary got to be known as the good guy and me, the angry one. Naturally, everyone gravitated toward him. It wasn’t until many years later that I loosened my tie a bit and started having fun. I’d say about 12 years later… Then, it seemed that before every customer signed their order they would ask the salesperson if they could come to my office and simply ‘get some laughs with MJ’ before leaving. Eventually, to save time, I would come out to the showroom at the very end of each appointment to wrap things up. The old way was getting a bit time consuming as my office had a very comfortable couch and often times I had to uncomfortably look for an excuse to break things up so I could continue with my day. People don’t mind spending money with people who they have a good time with. I tend not to do business with people who used to be like me. It’s not fun and life is too short not to have a little fun.
Two great examples of people who have fun and succeed famously are Tony Hsieh of Zappos and Richard Branson of Virgin.
3.) You can’t provide differentiation
This is a big one. The days of jumping into the market full of competition with no brand distinction or differentiation are over. I find that lack of differentiation is probably the biggest thing that will prevent someone from investing in or buying from you. That is why I think it is absolutely necessary to study your potential market like a hawk and look for something it needs that it isn’t currently getting. It is called branding from the perspective of your customer . Trying to develop a brand any other way I think is an exercise in futility.
4) Your Team Sucks
You know of many people who have brought their childhood buddies into their businesses and given them roles in their companies. I know this because I am one of them. I also know there are also people who don’t do their due diligence on the people on their team and they pay for it dearly. I know this because I am guilty as well. When putting your team together, make sure you can justify each person’s role. Sit down with a piece of paper and write down the talents and skills of each member of your team. If you have a bunch of empty space in front of one of them, you have a problem.
5) Dissension Amongst The Ranks
If there is dissension amongst your ranks, it can put you in a real bad spot. I know this like I do from most everything else, experience. I remember I was in the final stages of closing a deal with an overseas distributor in Germany, and one of the people who worked with me who I had an argument with just before the meeting, took the liberty during the meeting to let the distributor know the ‘wonderful’ things he thought of me at that given moment. One million dollar guarantee on the table and my colleague hadn’t the temperament to keep things to himself until we could again speak again in private? Of course not. Hard lesson learned.
6) You Don’t Believe in Your Brand
I’m not saying that you must walk, talk, eat, and breathe your brand. What I’m saying is that if you wake up in the morning and don’t want to walk, talk, eat, and breathe your brand there is a problem, as most people don’t need to be reminded to believe in their brand.
A great example comes by way of a good friend and colleague of mine, Daymond John, co-host ABC’s Shark Tank and founder of FUBU The Collection. Until he started wearing suits, I don’t think there was a day where I had not seen him wearing FUBU in the nearly twenty years I know him. He wrote an incredible book on branding called, The Brand Within that I highly recommend you buy. It also re-enforces reason #1, as he takes it a step further that YOU are the brand, and you brand yourself in everything you do since you were born. (Hence the subtitle to his book, The Power of Branding From Birth To The Boardroom)
7) You don’t believe in Yourself
You may believe in your brand, but you must have conviction and confidence in yourself that you will succeed no matter what. If you start questioning yourself the moment things go awry, you are not built to win in the game of business. If you don’t believe in yourself, there is no way anyone will believe in your brand .
8) You don’t see both sides of the table
You don’t have to have been on both sides of the table before to look at things from both perspectives. Much like you must investigate your target market and brand from the perspective of your customer, you must due your due diligence and read up on what your investor wants and what he or she is looking for. You don’t have to ask them to get this information. If it’s a customer, see who they are doing business with and see if you fit in that wheelhouse. See who they aren’t doing business with as well. This is equally as important as this will give you insight into what they are not looking for. Furthermore, if it is an actual investment you are looking for, many investors specify their criteria for investment. This helps you find tips on raising capital that will put you in a better position to get the investment you are looking for.
9) You Don’t Care about Who Is Investing In You
Many people simply go to the wrong people, companies and institutions when looking for money simply because they think if someone has money they are a good candidate. You must do your due diligence and really investigate the person, company or institution to make a good judgment as to whether they would be a good fit. You also have to look long term. If you are not offering a good enough incentive for them to invest, odds are you do not really care about their potential loss, only your potential gain. For this reason, you do not really care about them. They will see right through that.
10) Your reputation is shady
This one is hard to walk away from. If you already have a bad reputation in the business then you are in a bit of trouble I’m not going to lie, as all markets are circular and reputations are bound to hit you on the backside if yours is not a favorable one. Hopefully, you are not this person and let this be a warning not to screw people over, as you will eventually be the one being screwed.
While there are many other reasons that may be prohibiting you from securing the capital you are looking for, this list should provide you with a very good place to start. If you eliminate these mistakes, it should put you in a much better position to raise capital and close the deal.
Have a great day!
-Co-host of ABC's Shark Tank