August 10, 2021
Raising money is hard, but too many of you make it even harder. I am sorry, but some tough love will be coming your way. This article is the fourth installment in the series on the 10 characteristics of a Tardigrade brand.
Even with a great product, brand and plenty of whitespace, you must show up to every pitch investment-ready if you have any hope of raising money in this competitive market. Too many of you don’t. You walk away sad and drained. Could you have done things differently that might have increased your odds of getting a “yes” rather than a “you’re too early” or similar?
Let’s spend the balance of this article on the things you could do differently to present yourself and your business as ready for investment. These are the less sexy things needed in addition to building a great brand with demonstrated product/market fit.
Investors invest. That is what they do. Your job is to present the most compelling argument so that an investment in your company represents the single best opportunity to see a strong return. Look at your deck, listen to your presentation through the lens of an investor and ask yourself, “Am I making a strong investment case?”
It is all about capital efficiency; even investors see it the same way. If their capital is consumed because your unit economics stink that is not attractive. I get it. At the early stages, it’s often hard to demonstrate a strong product and contribution margin. But you must at least have a path to both. Understanding which channels offer the best economics and controlling your growth arc in alignment with the true economics is vital. Please don’t say that scale will solve your margin problem. Because with scale and brand ubiquity comes price compression. Very few ever truly realize the full benefit of scale as it relates to margin.
I’ve witnessed a weak supply chain trip up a ton of brands in investment conversations. Spending time developing solid relationships with vendors, co-manufactures and logistics providers is a must. Investors get nervous when these relationships are left informal or undeveloped.
Investors want to put their capital to work with companies that are ready to scale. Are you? Do you have a robust order-to-cash process? Can you or your co-manufactures absorb significant volume? Do you have the team or the plan to acquire the team needed to grow rapidly? These are all questions that should be asked and answered before any investor meetings.
It is simple but vital. You must have your proverbial crap together as it relates to your financials. Robust and concise reporting, including P&L, balance sheet, cash flow, etc., are a must. Additionally, you need the ability to manage inventory, track COGS, monitor receivables, control trade spend and more. Simply put, you need to have your house in order.
This can sneak up and bite you. Don’t diminish the importance of having all your regulatory and compliance requirments buttoned up. This includes co-manufacturing agreements, trademarks, operating agreements, employment contracts and product specifications. You need to have the right insurance and make sure your labeling, claims and ingredients all pass the test. Again, just have it together, don’t let this derail a potential investment, and don’t let it destroy your business. Left untended, it can.
None of the above is exciting, or it is what you likely think of when trying to differentiate your business from another. However, trust me, having this shit together is a game-changer. Showing up to every pitch investment-ready will significantly increase your chances of winning that capital.
Elliot Begoun is the Principal of The Intertwine Group, a practice focused on helping emerging food and beverage brands grow.
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