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Brief No. 001 – Inside The Investor Mind! – Money is not everything… Not!

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Over the past six months, we have listened to a startup pitch, after startup pitch, and I noticed something, an observation worthy of discussion – more like clarifying a misunderstanding. You often hear people saying during a pitch: “Money is not everything!”.

Well, as an investor, let me say this “Money is not everything – money is the ONLY thing!

Often, the startup founders and I are not on the same page in regards to the definition of business. In the eyes of the investor, “Business is a structured legal entity that is designed to provide products and or services for the purpose of making MONEY, as much as possible, as fast as possible, and as long as possible”.

I know it is a bit pragmatic. However, investors invest with the prime objective and intention to get maximum return on their investment. Some investors have other motivating factors, yet the majority of investors do it because they desire to increase their (and their family’s) net worth. It is that simple. Generally, if a particular investment produces a value, such as making life better, making a positive impact on society, or saving the planet, it is an added value, but not necessarily a primary decision factor.

As a startup founder, you need to know that the investors hear your pitch as, “blah, blah, blah Money…, blah, blah Money!” Remember, investors, invest in people, not businesses. If the investors do not get the impression that the startup founder is interested, REALLY interested, in making money, hh…it is an issue.

Here are your Power Tips on what the investor is looking for during a pitch:

  • Do I believe in this driver(s)? It is almost like “love at first sight”. As an investor, I want to fall in love with the founder. After all, it is like a first date, and based on my “first date” experience, do I want a second date?
  • Do I want him/her/them as my partner(s)? The moment that I am investing in the business, I become a partner, my name is now associated with the company. Do I want them as my partners?
  • Do I trust him/her/them? The first impression is a false perception. As investors, based on that first impression, we may decide to trust or not trust the person in front of us.
  • Do they understand what it will take? REALLY understand, in practicality, what it will take to get to the finish line. Do I think they can drive us to the promised land, or not?
    How do I get my money back and how long will it take? – Show me how you will make sure I will get my money and how long it will take.
  • Do I believe that you will take care of my money as if it is your own, not just someone else’s money? Pitching to investors is like a first date. The impression (and perception) you make determines if you will get a second date. It is not to say that there are other critical factors involved in making a deal, yet you need to pass these filters first.

The fact of the matter is that if you are REALLY interested in making money, you will more likely, or at least increase the probability of making it. Money is not a disease or an evil thing; it is just The Key to whatever kingdom you want to build.

First, we will focus on making money, and then we will decide what to do with it: keep it, donate it, spend it.

So, are you REALLY interested in making money?

Birmingham Angels
Author: Birmingham Angels

Birmingham Angels’ purpose is to become a premier Investment group that is committed to taking Angel investing to a new level. Building a network of active, progressive, and innovative investors that are committed to turning the US into a powerhouse startup ecosystem.

Birmingham Angels’ purpose is to become a premier Investment group that is committed to taking Angel investing to a new level. Building a network of active, progressive, and innovative investors that are committed to turning the US into a powerhouse startup ecosystem.

Startup

Brief No.003 – Inside the investor mind – The Rules of the Three™

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As investors, we are following what we call the “Rule of the Three ”. For the most part, it is the first set of filters we are using to screen and pre-qualify the investment opportunity.

We need to know if it fits our strategy or falls outside the lines. Those filters allow us to frame or position our “Listening” to the pitch in a particular way that creates a safeguard for our decision-making process moving forward. In case you are wondering, we do not possess a crystal ball, and yes there is a method to the madness.

What it means is that we “bucket” companies in one of the following categories:

  • DISRUPTERS
  • ORIGINALS
  • COPYCATS

Each one of those categories or “buckets” comes with a different risk-reward profile that dictates the investment strategy and the deal structure. Each investor and or fund, depending on the scope and the size of their “pocket, relates to those categories in different ways based on their overall investment strategy.

Let me give you our distinctions:

DISRUPTERS. – this bucket typically carries a high-risk profile. Each time that you disrupt the industry or a market vertical you face the “resistance movement”  and a higher barrier of entry. In many cases, it comes with a high price tag and will require a deeper pocket which means that the company will have to raise a significant amount of capital and spread the rate of return over a much longer timeframe. If it is significantly different, it may take some missionary work to educate the market and take more funds and time.  It is not so much a question; if it will succeed rather; how long it will take? And what will be the total amount of required capital?

ORIGINALS – the investor’s “sweet spot” bucket (ours at least). It represents companies that found an original way to solve or improve on existing products or service categories that do not require disruptive change. Mid-level risk profile. Given that the company addresses an existing market and customer base it typically does not need significant capital and the barriers of entry are much lower.

COPYCATS – the most non-attractive bucket due to the fact that these companies are simply copying others with no real innovation or originality. It is a high-risk profile and most often they will find themselves slowly but surely out of the market. A copycat with only a lower price will not own the market very long, if at all.

It is not to say that there aren’t success stories in each of the categories. Although our data show that the companies that are in the ORIGINALS bucket most often show a higher success ratio in the short term, which is the preferred investment life cycle of most investors. It is not a science by any means, rather a guiding principle we use to manage our investment strategy.

Given that none of us possess a crystal ball the 80/20 rule applies here as well. We have been wrong before, have we missed some opportunities? yes. Yet it allows us to ensure that our 80% will be a very strong investment.

SO, WHAT BUCKET YOUR COMPANY FALLS INTO?

Sidepitch Media
Author: Sidepitch Media

Sidepitch media is an online ecosystem, connecting startups, capital, and innovation from around the globe!

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Startup

Brief No. 002 – Inside the Investor Mind! – The Driver Enigma!™

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Contrary to what most people believe, investors invest in Drivers, not in Cars! The reality is that you may have built a great car, the main question on the investor’s mind however is; are you the right driver?

In our experience, 70% if not more, contributes to the decision rather if to invest or not, is all about the driver. The thought process is that if you put a great drive in an average car, you will get above-average performance.  If you put an average driver in a great car you will get below-average performance. If you put a great driver in a great car and in the right race, you will get outstanding performance.

We know we can fix the car, if needed, and find the right race, yet fixing the driver is more complicated, and in some cases impossible. If we have a great driver that might crash a car, we can put him in a new car and we are off to the races again. A great driver always seeks to improve, an average driver always settles for mediocre performance. A great driver will find ways to win, an average driver will find excuses and explanations.

Are you a great driver with a great car and in the right race?

So, the question is; what kind of driver investors are looking for? – at least these are my top five.

  • Confidence (not arrogance) – there is a difference. The confident driver knows when to be aggressive, what action to take, and when to take them. An arrogant driver thinks he knows what to do. Confidence is attractive, arrogance is not.
  • Resourcefulness – A critical quality in driving new business into the market is the ability to think on your feet and respond by way of finding resources and solutions for any problem without waiting for directions and without losing traction.
  • Emotional Intelligence (mature) – Know how to work effectively within the human system. Have a deep understanding of the human senses. Being able to empathize and sympathize when the need arises. Show openness and coach-ability and some degree of flexibility.
  • Intensity – Some call it passion, demonstrate a high level of motivation, highly focused, and present.
  • Preparedness – Do their homework and research. Know who they are talking to and more importantly, know their stuff, especially their numbers, forwards and backward, up and down like no buddy’s business. Know about the market more than anyone, become an expert on their business– really, no kidding!

It is not to say that there are no other personality traits that are considered as an added value, yet, you need to demonstrate the top 5 first.  There is a delicate balance between how much the investor is willing to be a resource of support and mentorship to work for their investment. As investors, we want you to work for us and not the other way around. As investors, we want to know that the Driver will drive through the wall to win the race and that they will guard our investment with their life – figurative speaking off course, you get my drift.

So, based on this briefing, the Million dollar question you need to ask yourself is:

If you are the investor, would you invest in “You”?

Sidepitch Media
Author: Sidepitch Media

Sidepitch media is an online ecosystem, connecting startups, capital, and innovation from around the globe!

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Entrepreneurship

Intensity and Stress – The Enigma

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I have observed many clients and discovered how easily they confuse Intensity with Stress. Most people that work in intense environments, have a temporary perception that intensity is “highly stressful”. At this moment, to a certain degree, one can begin to feel ineffectual or powerless on both a personal and professional level. This experience cascades (or projects) into everyday life in several ways, often as feelings of annoyance and/or irritation, making them temporarily mentally unavailable.

Effectively, Intensity is an ‘in the moment’ experience that manifests itself in the physical domain, i.e., distance, time, and form – the ultimate test of reality. Stress, however, exists in the emotional, mental, and intellectual realm as an interpretation, and therefore is not real. I believe stress is a human-invented interpretation that serves as a survival mechanism. It “labels” the difficult or challenging experience (situation?) and causes an “automatic” reaction in direct correlation to that situation. The perception of stress provides an explanation for the ability or inability to deal effectively with circumstances.

So the question is: How can two or more individuals who operate at the same level of intensity, in the same environment, have different interpretations, and therefore have a completely different experience, and reactions to it?

Example: One of my closest friends is an F-16 fighter jet pilot.  In our conversations, I learned that during operational flights, pilots are in a highly Intense environment. The intense environment manifests itself as various (extreme?) physical sensations such as heat, cold, G-force, or vertigo. For most of us, this environment would seem extremely stressful and it would feel impossible to function. However, for the trained pilot there is an insignificant experience of stress. For them flying a jet is equivalent to working in the office. How is this possible?

My observations led to the conclusion that the pilot was trained to be present – right now, right here. Pilots (their brains) are trained to suspend and/or not make the common interpretation that the “flight environment is stressful”. The pilot’s actions are appropriate and correlated to flying the jet, instead of experiencing emotions or intellectualizing them, which has nothing to do with the moment, right now, right here. Intensity is real while Stress is not real. After all, stress is just an interpretation, existing as a human-invented internal conversation mode. Human perception becomes a reality (at least for most of us). (comment: not sure this sentence belongs here)

Jet pilots train their brains to realize that stress is not real and “automatic” response to it is inappropriate. In other words, stress is an inadequate interpretation of the experience of intensity or of operation in an intense environment.

Why is this conversation so critical to the world of management?

In my professional opinion, today’s world of most senior managers, corporate executives, and business leaders is very similar to that of the pilot in the cockpit. The volume, complexity, and speed of the world around them are increasing at a rapid pace – i.e. the environment becomes highly intense. Their human operating system (their brain) cannot keep up, and before they know it, they can find themselves in “G-Force” situations very quickly. In the professional environment, this can mean losing their job, being demoted, or going out of business.

So what do we do with this internal conversation mode?

I created a few power tips that guide you to start developing prowess and best practices to overcome this paradigm.

  • Know and train your brain that the reality and your experience of reality are two different occurrences altogether. Doing your job and your experience of doing your job are two distinct things.
  • Look at things the way they are. Do not add anything or subtract anything. The sky is blue, the grass is green, and you are 6’1” tall.
    If you experience emotions such as frustration, anger, resentfulness, etc., realize that at that moment, temporarily, you are disconnected from reality (went away); you are now in the “Stress Zone.” Get back!
  • If the desired results and/or outcomes in any given moment are not correlated to your intentions and actions, stop! Apply the 60-second rule, step back, and get yourself centered. Evaluate the facts and information you have, refocus, and purposefully re-engage.
  • Nothing is wrong!  Things are the way they are, you do not have to like it, agree with it, believe in it, or stand for it. You just need to understand (or recognize) what is happening.
  • You are human, and to counter an automatic response to intense situations is against human nature. It will take a lifetime of training and practice to master it. The moment you stop training yourself, it will go away and disappear, and you will be back on the downward spiral very quickly.

You can use these guidelines to start developing your toolbox of best practices that work for you. There is no ‘one size fits all’ solution, we have different DNAs. What works for one does not necessarily work for another. Be creative.

So, are you stressed now or just intense?

Sidepitch Media
Author: Sidepitch Media

Sidepitch media is an online ecosystem, connecting startups, capital, and innovation from around the globe!

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