August 1, 2007

Raising Capital: Going to the Horse Races

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Investors are savvy. Investors who have been around the block before know that many deals aren’t going to go the way they are presented. In fact, the investor isn’t really betting on the business at all – the investor is betting on the entrepreneur.

In my experience, entrepreneurs are like the horses at the race track, and the investors are the gamblers who show up at the betting window, ready to lay down dollars in exchange for the opportunity to watch the race and make some money.

Investors think about a lot of things when they’re investing in a company. One of the things they think about is the bragging rights that might be attached to a particular project. Once the bragging rights wear off and the novelty of telling the story about the company in which they’re investing starts to diminish, the investors are thinking about how many dollars they’re going to make so that when they go to that next cocktail party, they can brag again.

They want to be able to talk about the deal they're in and how exciting it is. They want to be able to talk about all of the people with whom they're involved. They also want to be able to talk about how much money they’ve made so they can play the “one upsmanship game” with their friends to show them how smart they were to get involved in your deal.

Using our initial metaphor, investors love going to the race track. At the track, the investor looks at the whole picture. They walk around the track, they look at the sky, they look at the weather conditions, they look at the track and the mud, they look at the muscles on the horses, they look at the color of the saddle blanket that the horse is wearing, and they look at the jockey. They consider all parts of the race track experience, and somehow, in their minds, they put all of these variables together and place their bets.

Entrepreneurs have to be aware of the psychology of investors. If you don't present them with a whole package, then the investors aren’t going to be able to bet on your business opportunity. You have to make sure that your package is right. You have to make sure that you, the jockey, are in control of the horse, and that the business you're riding – that you're in charge of – is a business that could become something significant.

Investors have to believe that you, the jockey, have the ability to make the dream you’ve promised happen. If you accomplish the goals but the goals are too small, then nobody wins, including the entrepreneur. So set exciting goals and ride your business across that finish line.

About Joel G. Block

Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

Go Out And Stake Your Claim!