It's an oft-quoted statistic that 95 percent of startups fail. An entrepreneur's daily battle is to improve those 1-in-20 odds to something more appetizing for investors.
Top business schools will tell you that there are two principal ways of turning your business idea into an odds-defying reality: through family, friends, and the divine "Angel Investor," or through venture capital firms, incubators and accelerators. The first set are willing to bet on you; the second set make a living identifying and nurturing talent.
My experience with the Clutch Group demonstrates that funding is about the people who invest in your business. If they've had successful careers, their achievement can fuel yours. At Clutch, I went after names that some people wouldn't even dream of chasing. Some of those individuals turned me down. But fewer than you'd think.
Here are four simple tips your business can follow:
1 - You Need What Money Can't Buy - Experience!
If you want to go from a 5 percent chance of success to a more promising figure, funding by itself isn't going to get you there. You will have the chance, at various stages of your entrepreneurial journey, to inject money into the business. But the initial fundraising stage is a once-in-an-entrepreneurial-lifetime opportunity to get something better than cold hard cash: expertise. Relevant, business-building knowledge can transform an enterprise from "unlikely to succeed" to "on its way there." Crucially, this expertise has to be something you don't already have - an addition to your core competencies. It has to be knowledge that strengthens the spine of your organization.
2- Reverse Engineer Your Investor Group
We call it the "Ocean's 11 approach." Who are the best in the world in their respective disciplines? On a whiteboard, identify the individuals whose business acumen you respect. Perhaps it's someone who scaled a business from one location to a thousand - or maybe it's a leader who changed the internal culture of an organization. Make this list and make your investor group a subset of that list. And make your advisory board a subset of that investor group. Venn diagrams - they're easy! Done right, your advisory board selects itself.
3 - Make It a Personal Investment
Remember, you don't just want your investors' money. You want their wisdom. You want them to be your brain trust. And for that, you need their time. If you're taking checks from their investment funds, then you may be competing for airtime with other portfolio companies. Ask them for money from their personal accounts. Ensure that they have skin in the game. If the money comes out directly from their own pocket, they'll be sure to share their time and experience with you.
4 - Seek Recently Retired CEOs
Things move pretty fast for C-level executives. One day, you're running a billion-dollar company. The next? You have more time on your hands than you know what to do with. Consequently, along my journey, I discovered that the best advisors and investors were freshly retired CEOs.
They possess credibility, a full rolodex, no conflict of interest, and, most importantly, the time to impart their knowledge to you. In your pursuit of initial clients, having the newly-retired CEO make a phone call on your behalf can lend tremendous credibility.
When the Going Gets Tough
Two years after we founded Clutch, the world plunged into the global financial crisis. It wasn't the funds we'd accrued that helped us navigate those stormy waters. It was the depth of our advisory board whose combined expertise enabled us to make the right decisions at crucial moments. I attribute a great deal of credit to our advisors and investors for getting us through that period.
Ultimately, an education is only as useful as the entrepreneur receiving it. You're going to need guts, a business model than can succeed on its own merit, and absolutely no fear of rejection. Your investors can get you out the door, but you have to run the race. Good luck!