Make Money Online
I recently had an advisor call with one of our Founders First Network members. He’s a Black man who owns an electric vehicle charging station services business: His company is seeking ways to raise $500,000 to transition from what I call a Clydesdale business model, which usually tops out at $2 million in revenue, to a zebra company, which usually generates annual revenues upwards of $10 million.
He was very perplexed about how to achieve this objective. To him, his fundraising goal seemed like a lot. But is it? Does raising $500,000 for a zebra company sound like an overly zealous goal? It shouldn’t. Nor should raising money be seen as a mystery–as some kind of arcane art, magic, or simply a stroke of luck.
Unfortunately, for diverse founders, the prospect of raising funds is even more daunting because we very rarely have access to other successful entrepreneurs, relevant funders, and other resources. But that doesn’t mean we can’t succeed — not at all!
I’m here to share some critical insights to make getting funded less of a crapshoot. I’ve had personal experience at every stage, from raising money to preparing my company to deploy the funds.
Let’s start at the beginning. Before you even begin to ask for funding, you have to have all your ducks in a row. Investors are going to want to know as much as they possibly can about you, your team, and your business. If you’re not used to talking about yourself and promoting your team’s talents, you’d better get used to it. You have to sell yourself and your company.
Make Money Online Questions About Your Role as Founder
Investors are going to want to know if you as the founder, owner, or operator have the prior skills, experience, and demonstrated success to lead the company forward and give them a return on their investment. Your track record is going to be your greatest asset here. Your character matters too. How do you approach the business? Have you demonstrated your belief in it? Have you made a personal investment of money or sweat equity to help propel the company forward? Have you demonstrated you’re open to taking on investment partners who will work with you to grow the company?
Have you built a successful go-to-market and customer acquisition strategy that is profitably generating revenues? Have you put in place the necessary financial health tracking, monitoring, and reporting to ensure your operations are sustainable? Do you track KPIs in support of growth targets and performance against plans?
Importantly, do you operate with integrity in all you do? Do you keep your word with your customers, partners, and employees? If you’ve taken investments before, have you kept your commitment to investors? Do you take responsibility for the overall company performance?
If you can’t answer all of these questions affirmatively, the best thing to do is find mentors, advisors, and accelerator programs. There’s so much to learn as a business owner or operator. Leveraging outside resources tells investors that you’re willing to make improvements in who you are as a leader as well as in your business.
Make Money Online Questions About Your Team
Similar to the founder, investors are going to want to know what your key team members have contributed to your company’s mission and if they have the relevant qualifications, skills, and experience to take your business to the next level.
Investors will want to know how well your team works together. How do they track performance? Do you have key team members to support critical business areas like leading financial activity, tracking, and reporting? Investors want to see a professional who has a firm grasp on the financial performance of the company.
Sales and marketing is another key area. If you don’t have a dedicated sales and marketing team that’s run by someone with the right expertise, it’s going to be difficult to sustain growth into seven or eight figures.
Someone also needs to be running operations and solution delivery. Then, finally, you need someone supporting talent management–human resources, payroll, and benefits.
Some investors may be impressed with the diversity of your team, but that does not just mean demographics. This can be complementary skills and expertise. You’ll have to demonstrate how your group works together in harmony to make your business work.
Make Money Online Questions About Your Business
Investors are going to want to get under the hood of your business and understand what makes it tick. You’ll need to demonstrate the company value proposition, your differentiation in the marketplace, and the quality of the products, services, or solutions you offer.
Investors will want to know how much competition is in the market and how much customers value and appreciate your product offerings based on repeat sales and revenue growth.
They’ll want to see traction–past company performance that lends itself to future revenues. How is the business generating predictable, recurring revenues? Can you demonstrate strong revenue growth, year or over year, and preferably quarter over quarter? Does the business have strong gross margins? Are you selling into a marketplace that is growing and in high demand?
And can you demonstrate all this with properly prepared financials that provide the evidence of your business performance? Investors will want to see your most important KPIs.
Some key performance stats for zebra companies include:
- A minimum of $2 million in revenues
- Gross margins in the 30+ percent range, but ideally more than 50 percent
- 30 percent annual revenue growth potential
- Net profit margins of 5 percent at a minimum (ideally 15 percent)
Another critical factor is demonstrating that your business generates predictable, recurring revenues. Overcoming many investors’ hesitancy about and bias against a diverse-led business comes down to showcasing a strong track record, with several years of consistent, growing cashflows.
I know it’s a lot. But corralling all this information into something that investors can understand is great for you and your business, too. Even if you aren’t seeking funding, you can’t be successful without having all these details consistently at your fingertips. The more you can dive into the numbers and see how they drive your business, the better off you’ll be.
