Building Sustainable Companies that Attract Investment
By Anne Marie Maduri ● December 19, 2014 19:00
Building Sustainable Companies that Attract Investment Preparation. Practice. Commitment.
I have the privilege of working with the companies in the ideaBOOST accelerator. Repeatedly, they are subject to hearing me ask them ‘to succinctly articulate the product or service offering, outline the various functional area strategies that comprise the business model, describe the target market opportunity while assessing the competitive position, and then pull this all together to show how it’s reflected in the revenue model. And, by the way, while I’m on that subject, let’s look at the technical aspects of developing the financial model …’
Goodness, this all gets fairly complex, fairly quickly! I refer to this process as tackling ‘The Once and Future King’ challenge. Borrowing from T.H. White’s novel, a recount of the Arthurian Tale, I highlight the notion that ‘as you move towards your goal, your goal will concurrently move closer to you’. Double progress, all in one move! I use this analogy to strongly suggest to the companies ensconced in the ideaBOOST program to “persevere and commit to the process!” As you get deeper (and for a time absolutely lost in its depths), your company’s objectives will become more clearly defined, closer, and significantly more achievable.
My objective as the “finance specialist” is to show companies how to build a compelling investment story using a valuation maximizing approach, in order to increase the probability of success to secure capital or engage strategic partners and realize their growth plan.
Again, to further explain, this disciplined (and disciplining!) process, I’ll break down that statement:
- By ‘compelling’, I specifically mean building sustainable companies that deliver innovative products or services that are highly sought after by customers or strategic partners;
- A ‘valuation maximization approach’ refers to deconstructing a business model and assessing the strategy driving each functional component: Management, R&D, Sales & Marketing and so on, to understand the options and determine how each strategy is distinctive or higher value add relative to the norm or competitors’ standard, or, at the very least, conforms with best practices; and
- By the last point, it may now be evident, that to successfully secure ‘investors’, whether financial investors or strategic partners, requires both significant preparation and an indication of execution capability.
In short, the investment story or “thesis” needs to convey the company’s full potential – realized and unrealized. Of course, I’m often challenged with a little healthy skepticism as to why such a rigorous process is essential. My response is that an entrepreneur needs to not only speak the investor’s language, and so getting relatively conversant is required, but also, that the ability to apply the methodology and tools to iteratively improve the company’s business model will translate into enhanced performance and profitability – as viewed in the financial projection. At the same time, I do emphasize that it is a struggle for the company to concurrently to remain focused on running the business! A significant slow down or decline in achieving targets (such as milestones in an R&D plan or sales forecasts) can prolong the process, reduce the offering price, or even kill the deal.
In this series of articles I’ll address a variety of topics, both conceptual and technical, inherent in the investment process essential to early stage and emerging companies; and certainly, I’m open to requests!
Anne Marie Maduri is a finance professional and ideaBOOST mentor. Maduri & Associates provides investment banking and advisory services to companies in the Digital Media Entertainment and related technology sectors. You can reach Anne Marie at firstname.lastname@example.org.