What is the Value You Bring to the Table?

Animated frogs in business suits representing startup founders and investors discussing capital raising, investment strategies, and financial returns.

Animated frogs in business suits representing startup founders and investors discussing capital raising, investment strategies, and financial returns.

Showcasing Your Startup’s True Value

When raising capital, especially for startups and growth companies, the value proposition must be compelling. As experienced capital raising advisors, we often encounter founders with weak narratives, lacking the clarity and conviction investors seek. No investor will part with their money without understanding the value and potential returns of an investment.

Take, for example, the compelling claim from a venture capital firm: “For every $1 you invest, we will raise $86.” This powerful statement highlights the importance of demonstrating value. Investors want to know the cost and risk of an investment. What personal and professional risks are you taking? How are your interests aligned with theirs?

Surprisingly, we encounter clients with only an idea or a Minimum Viable Product (MVP) but no revenue, asking for $50M, $100M, or even more. When questioned about their own financial contributions, they often react angrily. But who will pay the legal advisors, capital raising consultants, bankers, accountants, and travel expenses? How do they envision the deal happening—from thin air?

One founder, for instance, sought $100M with just a prototype and no revenue. They had no personal capital to invest and balked at the suggestion of finding an angel investor. This lack of commitment and arrogance was a red flag. Despite a promising business idea, the founder’s unwillingness to invest personal resources or acknowledge the need for external support signalled a poor investment.

In another case, a startup with a groundbreaking technology sought $50M but had no market traction. The founder’s reluctance to invest their own money or show any personal risk made investors wary.

INVESTORS NEED TO SEE EQUITY, NOT JUST IN TERMS OF CAPITAL BUT ALSO IN PERSONALITY.

A founder who demonstrates commitment by investing personal resources and aligning interests with investors is far more likely to attract funding.

In conclusion, to raise capital successfully, founders must bring substantial value to the table. This includes personal investment, a clear understanding of risks, and a compelling value proposition. Without these, even the most innovative ideas may fail to secure funding. Remember, investors seek partners willing to share the journey’s risks and rewards. Are you ready to bring real value to the table

23 June 2024

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