This guest post is courtesy of Richard Phillips
ABC’s business-reality show, “Shark Tank,” puts up-and-coming business owners in front of titans of industry in an all-out investment-feeding frenzy. Startups pitch business plans to a panel of magnates hoping to lure these deep-pocketed judges to invest.
The potential investors put business plans, histories and personalities under the microscope, using business savvy to negotiate deals. While most startups searching for venture capital won’t have to deal with the bright lights of the camera, they can learn valuable lessons from a first-hand look at pressurized pitches.
Know Your Value
Investment deals come down to brass tacks. If you don’t come to the table with a fair valuation of your company, not only will a deal become less likely, potential investors will lower their offers when they see the lack of business sense. If your start-up has yet to turn a profit, you probably won’t get the multi-million dollar deal you had in mind. Potential certainly has value, but as the investor risk increases, you’ll be forced to give up power within your enterprise. Seek out unbiased opinions for what kind of investment your startup may be able to attract. With a fair plan, investors will respect your business savvy and become more open to forging a partnership.
Don’t Be Afraid to Walk Away
Perhaps they’re star struck by the icons in front of them, but “Shark Tank” startups seem to forget that negotiations are a two-way street. Your business may need money to get off the ground, but if you go into a negotiation bent on coming out with a deal no matter the terms, you’re liable to give up too much for too little.
Venture capital isn’t the only way to back your startup. Businesses that bring in some revenue can consider a business credit card, many of which offer helpful rewards. American Express cards, for example, provide businesses with reward options for savings on travel, shipping and supplies, among other things.
Tell a Story
If you’re looking for venture capital, your business isn’t where you want it to be, but you have a vision to get it there. Venture capitalists usually don’t commit to a startup without solid data, but the vision behind a business will help them invest with their imaginations. Tell the story of how you decided to launch a start-up, how you plan to make it a reality and why you think it will succeed. Share your story and investors will be more likely to share the journey.
Remember, you’re asking investors for money. Any declarations your business is a sure-thing undercuts the reality of the situation. You probably won’t know the answer to every question investors ask — that’s OK. Be honest about your strengths and areas you need to improve. Venture capitalists facilitate business growth for a living, so contrary to your instincts, potential investors may see a weakness as an opportunity for further growth.
Richard Phillips: With 20 years in project management, Rick took an early retirement from corporate America to work from the comfort of his home office. He is a consultant for mid- to large-size corporations and guest posts for project management blogs.