The big danger in chasing investment

When you’re chasing investment for your company, this is a dangerous time. I’ve helped dozens of people find investment, and and I’ve persuaded dozens more not to even bother, at least at this stage. Because chasing investments can kill your company.

Chasing investment takes so much time

We’ve all read the stories of X company which raised 3 million, 10 million, whatever the magic number is. Or Y company which crowdfunded and got 350K. But what we don’t hear about is all the work that went into chasing that investment.

Getting serious money into your company takes tons of time. Even getting a bank loan for 50 K involves so much faffing about, filling in paperwork, getting your accounts together, putting together budget projections, taking it to several banks, to see which ones will offer you the money and which ones you can persuade to not insist on a personal guarantee.

Crowdfunding looks like it’s an easy option. You just make a video, put it onto the crowdfunding site, and wait for the money to come in. Unfortunately, that’s not how successful crowdfunding works. Successful crowdfunding requires a crowd. That means that you have to do serious work to build your tribe before you ask anyone for money, and make sure that you can get them to the right level of enthusiasm to get their credit card out.

Angel investment also needs a lot of time and work. Unless you already have an investor, or a couple of investors that you know personally, or somebody can introduce you to, you going to spend a lot of time on this.  You’ll be pitching at angel investor events, following up people who seemed interested, distributing business plans, answering queries. You’ll also need to have a thick skin because most of them will appear to be interested, but won’t actually give you the money. It’s really not like Dragon’s Den. Even Dragon’s Den isn’t like Dragon’s Den. Apparently the real pitches take three hours each, and the Dragons all have tons of paperwork to read beforehand. Paperwork that you would need to spend time preparing.

And don’t even get me started on venture capital, and the amount of time that this would suck up.

Your most limited resource – time

This would all be fine, if you didn’t have a business to run. Time is finite for all of us, we all only have 24 hours in a day. The time that you spend on chasing investment is time that you don’t spend on running your business. And if you’re not developing new products, looking after customers, or building your online presence because you’re busy chasing investment, that means that your business will suffer and you risk losing money.

Shane’s story

A few years ago I worked with a business owner who wasn’t called Shane. He was very ambitious, and wanted to grow his business very quickly. He reinvested all the profits that he’d made into the company, and had already successfully taken himself out of doing any client work so that he could concentrate on managing and growing the business.

Shane had a team of staff, a nice office, and a great service in a growing market. When he came to see me I thought that he wanted help in marketing, and I kept trying to talk about what we could do to bring in more customers. Shane however, thought that he had the marketing covered because he’d spent money on a marketing agency, and was in talks with a big PR agency who wanted him to spend thousands to make his brand the market leader in his area.

I was worried because there are lots of gaps that the marketing agency hadn’t covered, and lots of things that were on the list of things to do, but they weren’t going to do it for months. And to be honest, the PR agency proposal was a bit of a rip-off.

Shane thought that he could move a lot faster if he had about 200k in the bank to spend on marketing, PR, and a few new staff. Like most business owners, he wasn’t that confident about the financial aspects, so he wanted me to write a business plan for him to take to a couple of angel investors he’d been introduced to.

What happened next

I spent a day writing the business plan, and sent off to Shane along with my invoice. Shane is also agreed to some regular mentoring sessions with me, but after the first one he didn’t book any more sessions. I kept emailing him, suggesting that we should get together and talk about marketing. Sporadically Shane would email me back, and tell me how he was getting on with the investor. He’d had a meeting, it seemed to go well, and he was meeting with the second investor soon. Meanwhile, he was worried because the phone wasn’t ringing with new business enquiries.

To cut a long story short, Shane didn’t get the investment. He didn’t get the investment, because the investors, of course, looked at his accounts. Investors want to back a horse which is already winning, they want to invest in a company which is already profitable, and has the potential to be more profitable. Shane’s company was only breaking even, because he was spending more money than he needed to on the marketing agency who were under performing, and on a staff team who were mostly twiddling their thumbs. The last service I performed for Shane was to introduce him to the liquidation company. And the last I heard of him was the letter from the liquidation company, because Shane hadn’t paid some of my invoices so I was a creditor.

Don’t be like Shane

I’m not saying don’t chase investment. Investment can be a great thing, as long as you don’t become obsessed by it and see it as the holy grail, or the magic elixir which will save your company.

It’s helpful to see chasing investment as a sideline that you’re doing. Maybe you spend one day a week chasing investment, and spent four days a week running your company. Ultimately, your attention needs to be on the business, because it’s the business which will create the money for you.

Get some help

If you’re thinking about chasing investment, and growing your business dramatically, come and talk to me first. If you buy me a coffee, and maybe a piece of cake, we can work out if you really need the investment or if you can grow your company organically. I can give you a steer on the best path for investment how much you actually need to raise.

And we can talk about how I might be able to help you, both with your main job of developing the business, and with your sideline chasing investment.

Here’s how to buy me coffee and cake – let’s talk…

Photo credit – Chasing investment in Australia, by Ersu

Secrets of Business Success - your free book

I've written a free little book containing the Secrets of Business Success. You can download this for free to see how your business measures up, and get some ideas to start transforming it today.
  • This field is for validation purposes and should be left unchanged.
The Joy of Business
Secrets of Business Success
Julia Chanteray