Seeking funding this year? How investable is your company?
You can only secure funding if your company is investable and the right opportunities are present. There are many ways to galvanise opportunities, but here we’re going to focus on what it can mean for a company to be investable.
When we break it down, being investable comes down to two factors:
Investability = what you do x how you do it
In the early-stages, getting this investability equation right can be a challenge and an art form, particularly when your day-to-day energy as a founder needs to be heavily weighted towards the what you do rather than the how you do it, because if we don’t have a ‘what’, the ‘how’ doesn’t matter.
But if you want to attract great investors to help fund your growth plans, how you do it matters almost as soon as you’re thinking of making your idea a business.
What you do is in essence the commercial opportunity and the most crucial aspect of an early-stage startup.
How we would define ‘what you do’ is, but not limited to:
The solution and unique value proposition - what is sold to customers;
The traction achieved in selling to customers (or problem-solution fit to product-market fit);
The team’s expertise in creating, delivering and managing the solution;
The business model, or how the company creates, delivers and captures value;
How what you do is already addressed by others (competitors);
Any regulation or thematic/structural headwinds that may impede or support future growth; and,
The market being addressed and how big it is, or how big it might be in the future.
How you do it is what makes any of this growth possible.
It’s the approach taken to doing business and how we govern our businesses, being things like, but not limited to:
Has the company been set up correctly and in a way that makes sense for the company’s plans?
Is the company abiding by the regulations it needs to and does that matter?
Is the company safeguarding its secret sauce and IP?
Is the company honouring its obligations, such as paying employees and suppliers?
Are the founders monitoring the company’s financial position, ensuring that they know what they’re spending and how long their runway is, even when they’re taking big risks?
Are the founders creating a culture of high performance with support and accountability, or one of blame and deception?
Are the founders managing the board and their investors and keeping them informed of company performance in an appropriate cadence?
And so on.
When we’re just starting, balancing the what and how can be an art form - you want to be focused on getting to product-market fit and beyond, while balancing all the factors that make this growth possible.
When we’re scaling, this balance moves from an ‘art form’ to becoming equally imperative, because how you do it intrinsically serves what you do. For example, if you’re not safeguarding your secret sauce and IP, then you’re running the risk of this being leaked and used by others, and you might end up losing customers and having no business at all. Another example could be around the mis-management of your company’s finances - if you and your management team are not fluent in managing operations and financials and you’re trying to scale, you might mis-manage your funds and mis-calculate your runway, which could result in the company finding itself in an unintentional compulsory windup scenario - ie. your company is no more. As you scale, it’s this how you do it that is no longer optional or something we can leave till later - it becomes a critical part of running the company, and we set our habits around this in the early-stages.
When it comes down to it, if you neglect or don’t do the ‘how’ in a way that is meeting your obligations and protecting the value of the company, you’re running the risk of value leakage along the way. In addition to the potential operational risks, this can also play out when you need your next round of capital, or when a strategic partner comes knocking to acquire you - not having done ‘the how’ properly means you’re running the risk that these valuable opportunities could be delayed, costly to remedy and complete, or halted all together.
Ultimately, it doesn’t matter how you want to run your company, it only matters when you want to bring other people into the equation, fund your growth plans with someone else’s money, or realise the value of your business through an exit. There will always be capital somewhere for businesses with growth potential, no matter how they do business (almost!), but if you want the opportunity to access a broader range of investors, including those high quality investors who are great at what they do and are going to support you throughout your journey, how you do business is going to matter to them.
On this, our Board Course Director, Ashleigh Camm shares:
Ashleigh Camm of LUNA
“We are all experts in our fields, but when we haven’t managed a company before and we don’t know what we actually need to do when it comes to the ‘how’, it can seem so daunting and hard that we often avoid these tasks all together, which can cause us problems down the track.
The beauty of knowing what your company’s obligations are, and what is expected of you as a CEO or management team member, board director and investor, can be so empowering. You’ll know the different hats you wear seamlessly throughout your day, how they interact with each other and why each are important, plus how you can leverage them for the benefit of you and your company.
When you have this knowledge, you’ll be able to implement ways to make the needed processes so much simpler and efficient for yourself, your company, and your board, and be able to feel confident that the way you do business is not going to hold your ambitious plans back.
That’s what the Startup Board Course is all about, equipping founders, investors and ecosystem professionals with the need-to-knows of the board so that you can right-size your governance approach for where you’re at, and amplify your venture to the heights you aspire to.”
Of course, we also could have just googled this to get the same answer! In response to ‘how would investors define investability’, Google’s first entry, page one is this - triple tick!:
So whether you’re a founder, investor or ecosystem professional, if you want to know more about the roles and responsibilities of the board and management team, and how you can manage these effectively for the benefit of you and your company, we talk about all of this and more in our Startup Board Course. Our next Cohort kicks off soon - find out more here.
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