Whenever I have a word with the guys of my age, I usually discover that many of them more or less working on a start-up business. “Start-up” is one of the most hyped term which is used in our generation. Steve Jobs, Mark Zuckerberg, Bill Gates and many other legends are some of the incredible examples which made us believe that if you have full faith in what you are doing, one day you will succeed. I see many youngsters who are actually trying to follow the footsteps of those legends. I know many such people who have intelligent ideas; ideas which have the tendency to make a difference, Ideas which are faster than you or me can even think of, ideas which will make things better, ideas which are beyond our imagination. Some of these ideas will definitely make our future better. Some of these ideas will help us not to forget the sweet memories of our childhood. And I believe that when these ideas will become a product, they will be incredible. The problem is, this is what the idea holder also believes. But unfortunately, The Investor or the Venture Capitalist (V C) doesn’t believe that.
I have seen many guys getting dejected when VCs reject their ideas. They simply turn down their business plans and bid them a goodbye. The problem is, the guys who went to sell their idea have no idea that what actually the problem is. In other words, they try to accumulate funds by simply showing them their business plans and how their final product will look like. They try to show them that how the world will be a better place to live once their product or services will hit the market. Little do they know that the Investor is neither totally interested in your idea nor is he is much interested in your Product. These two are important factors, but there are other major factors which interest VCs to invest their money. A true investor will look down on two things which I believe are darn important and will help you to fetch funds for your start-up business –
The Business System
When you make a Business plan or you make a power point presentation, we generally describe is all about our product, how is it different from your competitor, how much profit it will fetch in the market, how will it create a difference in the society and so on. But what we forget to include in our plan is – As a system, how will it work? Confused? Understand this in another way. As a layman, we think that any person who is working for himself or herself is a businessman or an entrepreneur. But we don’t realize that this is actually a myth. Actually those guys are Self-Employed. A business is a system which grows itself no matter whether the owner is physically working in that system or not. A business is a system which will grow itself even when the owner went on a holiday and returns after six months. An investor looks for that tendency in your plan. He looks for that kind of contagiousness in your business model. He looks for that kind of automation in each of your business processes. Also, he sees that kind of leadership capability in you.
I have used this example earlier also, that once Ray Kroc, the founder of Hamburger chain, McDonald’s said that his real business is of selling franchisees not of selling Hamburgers. If we get deep into the business model of McDonald’s, we will realise that it is fantastic. Innumerable Franchisees, Same Taste, Same Preparation, Same Price but dynamic environment. It is wonderful to observe that how this model is working. This is what we call as a system. Everyone knows that innumerable people in the world can make a better Hamburger that McDonald’s. But there are few who can create successful business systems like them. The Best thing is that an experienced Investor understands this. He will never want to lose his money. So, I think that we must invest time in creating a Business System before we visit a VC to fetch some investment.
The Plan B
An experienced Investor will definitely take a risk. But he knows the core difference between taking risk and gambling. Everyone wants to make his or her money grow, but gambling is not a solution to that. When you present your plan to an Investor, he might ask you the very obvious question – What if this plan doesn’t work out?” How will you make me recover my money?” Is there any Plan B? With the product, there can be obviously No Plan B, but with a system, there can be another plan. Create a Plan B. Change your Strategies, not with the product but with the Business System. Find a new way to reach your customers. Create new Marketing Strategies. But Make sure you’ll be able to show them profit initially on a piece of paper. Tell them where you are saving cost. Chances are, they will consider your plan.
So to conclude this, I want to say that as you working on a start-up, you very well understand this that the money is not the main objective of your efforts. Money is the By-product, not the main product. If you are doing all these efforts just for money, I request you to think twice, thrice, many times before hitting the market. If you are passionate enough to work with your plan, Congratulation, the market is waiting for you. If you always think about competition, it can be a messy ground for you. If you think that there is abundance in the market and your product will create a space for itself, it will be a great and joyful. So Keep Growing. Keep Rocking. And one wise man said to me – Don’t be afraid of failures.
I’ll See You On The Other Side 🙂
Love, Laughter and Peace
Himanshu R Nagpal