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Setting Yourself Up for Success

Business success requires business preparation. You don't have to be a master tactician, but you do need to have a plan in place. This plan will act as a foundation for everything you want to achieve.

Diligence is a key word in the business world for a reason. When a potential investor sees that your startup is well-thought-out and managed with a high level of expertise, with defined and realistic goals, that investor will know that your business is a solid proposition, and, therefore, the business will attract more investment. This approach is about cultivating a working process that leads to success: success for you, your startup, your investors, and your employees.

Investors Don't Want to Invest

As a startup founder, you need to understand how truly difficult it is to attract investment. Many rookie founders make the mistake of assuming that their product/service concept is so attractive that all they need to do is put the word out and watch the capital roll in. Nothing could be further from the truth.

Even with a fantastic idea, investors will still be wary. Why? Because they know that any investment could potentially fail, costing them the assets or capital they've supplied. You need to therefore begin your search for investors with one mantra: Investors don't want to invest. When you understand this and put it at the heart of any pitch, all of your efforts will be focused on persuading investors away from this negative outlook, and encouraging them to be part of your business.

Don't make it easy for an investor to turn down the opportunity. The investor has to want it, and he or she has to feel that an amazing business is waiting, one that could provide them substantial revenue. It is all about creating the feeling of a train that is leaving the station: if they feel the train will be waiting there forever, they will never get on board.

The Core of Your Business

Ideas are meaningless without a masterful execution. Attracting investors is about more than a great idea. It's about showing the correct preparatory skills that will persuade potential investors that you will handle their capital diligently. The most effective way to do this is to put the core structure of your business in place before you begin seeking substantial investment. If you have not taken the steps to prepare your business adequately, this will count against you significantly during negotiations.

There is one caveat to this, however, which is that, in some cases, you will need to seek angel investment before you can put all aspects of your core business in place. In these situations you must do what you can. This is not a license to avoid doing the work. You will still need to have adequately researched your product/service, the costs, the current marketplace, and so on in order to attract an angel investor.

There are many benefits to having your business structured, in order, and built with thought and care from the ground up. Beyond attracting investment, this process will help you cultivate a business ethos and work ethic that, when applied to all future business decisions, will significantly boost the efficiency and success of your organization.

Experienced and Talented Management

Every investor wants to know that the person in charge of their money is talented, and someone who can generate positive returns. The running of a business therefore can be boiled down to two words: good management.

No matter the area or industry, you'll need a comprehensive, talented, and experienced management team in place. If your startup has a strong team, then any investor can be more confident about the direction and potential of a business.

Just as Jim Collins states in his book Good to Great, as long as you have the right people on the right seats of the bus you will end up finding your direction. Startups need to identify a repeatable and scalable model. Investors do not expect you to have all the answers, but they at least expect that you'll have people around you who will help to you find them.

First, you will need to assess how much you personally can contribute toward management. It may be that you are fully qualified and have all the relevant experience and knowledge, but more often than not the first step a startup founder should take is to identify his or her own limitations. By bringing in managers who can perform specific tasks better, you will free yourself up to oversee other aspects of the business, knowing that operations are well in hand.

Your management team should have domain experience. A potential investor is bound to research the work history and achievements of those making key decisions within your startup. If, for example, your startup is based in the smartphone industry, and yet your management team comes from the food industry, this will not instill confidence in the investor. They want to know that the team making important decisions has done this work before, and that they know how to achieve success within your specific industry.

I am a big believer in hiring people who are smarter than you, and whom you can trust with getting the work done. At a management level you need people who can contribute a good amount of strategy to the mix.

Organize Your Corporate Structure with a Legal Team

A business is an organization-this is an important point. Your startup must be effectively organized and must have the correct corporate structure in place. Without it, your business will either suffer from poor efficiency, or end up in legal strife due to not having the correct legal documents or permits in place.

Being a recovering lawyer myself (still seeking therapy), I know how important this area is. Startups are tempted to cut corners all the time, but the legal process is not something that you want to mess with. We onboarded Peter Fusco from Lowenstein Sandler on day one. He has been fantastic to work with and the decision has given us peace of mind. I've heard plenty of nightmare stories, and I would definitely advise that you get the right counsel. Don't choose cheap services or depend on your cousin the divorce lawyer, who might give you a helping hand with corporate matters during his free time.

Remember that there are certain legal responsibilities that, if not fulfilled on the part of a startup founder, can scuttle any investment deal. If you have not filed for patents, for example, then an investor will be less likely to commit. You have to ensure that what your startup is offering cannot be simply copied by someone else in terms of branding and, under certain circumstances, technology. These aspects of your startup can be protected through patent and copyright filing, which can be handled quickly by a qualified lawyer.

You should also clear any legal disputes connected with your startup as quickly as possible. If you are in a dispute over intellectual property rights, or any other part of your business, with a previous partner or other individuals, then this will be a major impediment to investment. Any such occurrence will be made apparent during the due diligence investigation an investor will carry out, so it should be dealt with swiftly so that there are no pending legal issues casting a shadow on your company.

In the disclosure schedule that you will need to provide (within your offering materials), list all the matters that might put your business at risk. Lawsuits and other legal issues need to be included here; otherwise you might find yourself in a lawsuit, courtesy of your investors, later on down the line. In the disclosure schedule you will need to be as transparent as possible. For that reason, you need to make sure that, at any point when you are seeking money, you have already resolved any troubles or concerns that might scare people off during the disclosures.

Helpful Advisors

No business is built purely in isolation. If it is a success or failure, it is because of actions taken and the available knowledge that informed its strategies. Every startup founder must have a comprehensive knowledge of the industry they are entering, but it is also important to have access to skilled individuals who have the experience to advise on relevant scenarios as they appear.

Your advisors are a sounding board, a well of knowledge that you can return to when needed. This is especially important when you are a first-time startup founder, but even the most experienced businessperson needs to have a solid network of advisors. Why? Because no one person has all the knowledge, all the answers, or all the talent. A successful business must rely on a varied supply of these key aspects. Furthermore, there will be times when you are presented with a choice, perhaps one that could define your business. In this situation, having an experienced mentor to advise you on the pros and cons of each decision is an invaluable resource.

Choosing your advisors is more difficult. You can take personal experience into account, going to those you trust most; but in business you may have to cast your net a little wider. A good advisor will be much like your management team. (They may even double as your advisors.)

Domain knowledge and experience of your chosen industry will help, but no single advisor will have all the answers. You may have one advisor who has expertise in advertising, another who understands an important manufacturing process, another offering advice on tax or important relevant legislation. Whoever they are,...