Like minerals or metals, no two business sectors have the same inherent value. Some are gold and some are gravel but if you understand how Investors rank these companies you could turn this around.
While the crowd will always be attracted to the next shiny thing, most money is made on reliable, boring and often unappealing businesses.
Remember that mining gold can be prohibitively expensive while digging up gravel is cheap and is used every day and everywhere.
Although gold will always get more attention than grit, there are many ways to make your gravel look like gold to Investors.
So if you don’t have gold learn how to make your gravel look like it – usually by showing that you can make profits with much lower risk and startup costs.
Here are some ways to do this:
- Is Your Industry Offering Support or Sales?
The no. 1 attraction to investors is growth – dramatic growth. So no matter how ugly the industry, if your business increases sales or any kind of business activity – especially if it enables business growth that would not otherwise occur – you may have gold.
Gold: Examples of Sales Enablers or Boosters:
- Door Opener – If your business enables companies to enter markets they previously couldn’t reach.
- Sales Booster – When companies that were local can now go global or that could only sell in one category can now sell in more. This is especially good if these are high-growth low-competition categories.
- Sales Platform– Investors are most interested in platforms that allow others to bring the value and then you get to take a cut (think: stock market, auctions etc.)
- Sizzle or Snooze: Businesses that Will Put Investors to Sleep – or not.
You may love what you are doing and think it’s the most important thing in the world. Investors will almost always see it differently. The good news is that if you understand this and think creatively, you may be able to turn that around.
Grit – Examples of businesses Investors don’t love – but which you can still turn around.
If your business plan is based around the following, be aware that they may sleep-inducing triggers for investors:
- HR, customer or corporate support. These are expenses and not sales growth inducers. They are hard to measure and often managed by gatekeepers with limited budgets and murky agendas.
– Possible solutions: if you can show these really make a difference or have happy returning customers, then say so up front – it could make a difference! Otherwise, you always want to frame a new paradigm in the industry and claim to have a platform that other players will have to use to enable overall growth.
- Government agencies of any kind
– Possible solutions: If you have special access of some kind. Contracts or something along those lines, you have a chance. Otherwise only investors who know that specific branch of government will be interested. They are just too many gatekeepers with murky agenda to interest Investors.
- FDA Trials
– Anything that requires money for trials is a no-no for general Investors. Specialized Investors might be interested but only if they have experience in the area.
– Possible solutions: Find areas to prove the idea that don’t face these upfront barriers. Sometimes it is a game or an overseas market. Find it.
– Possible solutions: There are some known areas of value here – such as SAT and GRE’s and so on. Anything that “cuts the fat belly” of the industry by more than 70% might be of interest to investors but they generally have to be specialized or experienced in Education. For most investors there are just too many gatekeepers with murky agenda to interest them.
- Ad supported Media
– If your business plan just assumes it will be supported by advertising – and you have never been in the business of selling ads – then you may be in trouble. Ad networks don’t pay that well, and ads generally don’t sell by themselves. You need a sales force to handle customers who are generally hard and fickle. The only want to get around this is to show that you can sell or that for some compelling reason you have partners that deliver sales. Better yet, your idea is so good that at least 10% of your users are willing to pay a subscription fee.
- Value is in the Data
– In an era when hackers can steal credit card info from Equifax of download the CIA’s list of most active spies, your amazing data just doesn’t seem so valuable any more. However, if your tool or platform enables others to extract data – which you also get to keep – then you might have something. Real-time actionable data is different though. That is like fresh fish – and people will always prize that. You just have to show the investors who your fish buyer is.
From: Are You Fundable?
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Posted on March 4, 2018