by Thomas Mezger
The other day, I met the founder of a new company near my home. The business is in an industry which I have great personal interest and I thought it would be a good opportunity to provide financial assistance. They needed help. The company had been recently featured in the local newspaper, was in a rapidly emerging technology and was really starting to generate a buzz. As a potential CFO, my first meeting with the founder went better than expected. It seemed like a great fit.
I signed an NDA, then received their business plan and other legal documents. The plan showed where they wanted end up, but did not explain how they would get there. What little financial information was provided was very elementary and lacked supporting detail and credibility. I thought their production time-line was unrealistic, considering where they were in the development process. They readily admitted their plan needed help, but being focused on the product development phase, they had set it aside.
I asked this new company some probing questions about their choice of technologies, the target market and plans to raise capital. I must have hit a nerve. Their answer was, “We don’t need people that question our vision; we need people to execute our vision.” Frankly, I was disappointed. Every CFO needs to challenge executive assumptions, the team’s decisions and strategies, in order to effectively present them to potential investors. Certainly a knowledgeable investor would ask similar questions. While focusing on development is critical, it’s not the only thing. Attracting investors is a major responsibility of the entire executive team, and in particular the CEO. To help CEO credibility, a CFO needs to be well-informed and to remain objective. CFOs are best equipped to present your case to investors on behalf of the executive team, just like lawyers are best equipped to present your case in a court of law.
Attracting investment can be like rabbit hunting. Not much there. After you shoot the rabbit, skin it, and cook it there is not enough meat to feed the family. Times are lean. The investment community today is much different than it was ten years ago. Start-up plans were done during a lunch meeting. Rules were lax. That is no longer the case.
I spoke at length recently with a private venture capital group who has all but abandoned funding start-ups, (odd for a VC) and has instead shifted to emerging technologies, small but with proven track records, and more importantly, credible executive staffs who can potentially get big. They have no interest in risk, no matter what the upside. In their view, if you aren’t already making money, at least a little, they’re not interested. A business on a solid footing, with real operations, financial controls, the foundations of enterprise, is what they look for. They’re no longer interested in creating a company out of thin air, only adding to what is already there.
Stock declines are a sign of the times. Equity markets have been chewed to ribbons by broken lending models, huge deficits, dead credit and sky-high energy prices. Taxpayers are saddled with a clean-up none can afford and the economy, while not totally stopped, is grinding to a screeching halt. The country, every sector of the economy, must reinvent itself. Detroit must re-tool, airlines conserve even more, companies drive toward novel ways of limiting transportation and energy costs. They all need money to do it. In the middle of this situation, how are you going to move your own ball forward? Do you have what it takes? What makes you stand out? Everyone is looking for investment. You will have to scramble for each and every penny. Why makes you so deserving?
Ultimately the shake out will leave only executive teams who can plan, execute and stay on track at all times – no surprise there. Good ideas are important, but coherent leadership under an executive team in sync with each other is great. Investors detect this. Companies like Thomas Financial Services, www.thomasfinancialsvcs.com apply insight and experience to get you back on the ladder to success. It’s not enough to manage an opportunity. You need to manage the whole business through constant attention to financial systems, ERP, the supply chain, customer experience management, production, and all the nuts and bolts that give investors confidence.
Lots of great ideas die on the vine. Companies implode for the dumbest of reasons. The biggest and oldest banks and investment houses of our time are falling in on themselves over simple missteps that could have been easily avoided. It’s not about oversight, it’s about execution. CFOs and their credibility with investors make a huge difference. Chief executives who are at odds with their CFOs are a red-flag warning for any company. Run from them. Listen to your CFO. Stay on track. Execute to a realistic plan and you’ll never lack for investment. Plenty of companies are liked, but few are admired. Be one of them.
About the Author:
A credible start-up looking for funding and people with money have a tough time finding each other.
Small Business Consulting through Thomas Financial Services LLC jump-starts your credibility to help connect the dots. CEO Thomas Mezger, tmezger@thomasfinancialsvcs.com and SVP John Sawinski, jsawinski@thomasfinancialsvcs.com bring compact, broad-ranging experience getting companies to the next level. Call Thomas Financial Services first.
No Comments »
Filed under: Management