Early Round Financing Lessons Provided by Netflix
Most would declare that streaming countless hours of CBC’s Dragon’s Den or its American cousin Shark Tank is an utter waste of time. To the contrary, I would call it research. While show’s such as Dragon’s Den or Shark Tank will not make you an expert in early-round financing, they do provide many of the preliminary questions and concerns that any educated investor will expect you, the entrepreneur, to answer and establish.
Here are just some of the lessons gleamed from the constant stream of Sharks and Dragons that may help you before seeking any early-round financing...
1. Establish a Market
Ever notice that the first question after the entrepreneur gives a great pitch about their amazing new business is always...“so what do you have for sales?”...This is not a coincidence.
Educated investors want to know that there is a market for the product, that demand strong and that it will continue to grow. Nothing will scare away an educated investor faster than a big dreaming entrepreneur with no sales to show for all of their hard work.
Lesson: Have sales. Before looking for anyone else’s money prove that there is measureable demand for your product or service.
2. Know Your Numbers
Not sure what your profit margin is? Your gross and net income? What’s your financial projections next year? How about five years out?
The fact is, that you or someone from your team will need to have a strong grasp on the books to be taken seriously. At the end of the day an educated investor only cares about gaining a return on their investment. If the investor see’s that you don’t take great care in dealing with your money, there is no way that you’ll ever get any of theirs.
Lesson: People lie, numbers don’t. Educated investors will want you or someone on your management team to walk them through your company from a financial standpoint.
3. Know Your Industry
Before ever stepping foot inside an investors office you should have a deep understanding and grasp of the industry that you’re competing in. Who are the major players? What makes you unique? Or, as Mr. Wonderful would say, “what’s stopping those guys from crushing you like a bug?”
Lesson: Research. Research. Research. You should be reading blog posts, industry journals, magazines, books! Whatever you can get your hands on regarding your industry. Know the industry the back of your hand.
While we aren’t Sharks or Dragons, we at the Business Venture Clinic we can provide you with the information needed to ensure that you’re on the right path before making any early financings. Please contact us today, we look forward to hearing from you!
James Hamilton is a 3rd year exchange student at the University of Calgary's Faculty of Law.
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Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.