Robin Lester and Greg Bosl understand funding. It's their specialty.
Lester, managing partner of Tampa-based Florida Growth Partners, helps emerging growth businesses find access to capital across the Southeast. Bosl, vice president at Tampa-based investment banking firm Hyde Park Capital, focuses on capital raising and mergers and acquisitions for middle-market businesses.
First, find friends and family
“When pitching to potential investors, you want to pitch to your uncle first,” Bosl says. “Cut your teeth with those conversations first, not Kleiner Perkins first.”
The process of doing that, he says, will help refine the pitch or answer questions. For example, a software company is supposed to have gross margins of around 75%. If the gross margin is 50% from overpaying the sales team, that's important to note, Bosl adds.
Have answers to the following questions: What will you do with the investment money? And what keeps you up at night? These questions present an opportunity to share where you can improve. You also need to know your exit strategy, Lester says.
Be ready to move fast
“You've got to be able to do it in 5 minutes, 15 minutes, 30 minutes, or whatever they've got,” Lester says.
Presentations should be “short on words and high on metrics,” Bosl adds. It's important to have numbers and key metrics that stand out in a format that's easily digested and shared.
“Twenty slides,” Bosl says, “are not better than five.”
Don't skirt the truth
A proforma of the company's financial projections should include reasons for projected costs and revenues, says Bosl. “Don't just slap a growth rate on it,” he says. “Explain, 'This is how we'll see this growth.'”
Honesty is another must-have. Says Bosl: “If your proforma is unreasonable, (investors) will discount everything you have to say.”
And a final key point with these documents, he says, is to recognize everyone has a competitor. “If you say you don't have competitors, they're just going to say, 'Now I have to go through the incredibly annoying process of trying to figure that out.'”
Investors seek strong managers
Investors often invest in the company's management, not just a product or service. “It's like betting on the jockey as much as the horse,” Lester says. If an investor likes the leadership, the valuation will improve.
Passion is also huge, says Bosl. For investors to dedicate money and time, “They want to at least believe that you like what you're doing and spend your free time doing it or thinking about it,” he says. “You're not a 9-to-5 entrepreneur. When you're at your kids' soccer games, you're still thinking about it.”
Find good advisers, treat them well
To gain access to potential investors, Lester recommends finding influential CEOs. Offer to buy them a bagel in exchange for advice.
“If they open a Rolodex for you, treat them like a client, like a potential investor, because it is now their name tied to your company,” Bosl says.
Come to the meeting prepared with an agenda. Talk about upcoming goals, and report back on accomplishments in follow-up meetings. Says Lester: “Building that credibility makes it easier for someone to pull the trigger.”