Learn to succeed with investors–from a guy who failed.

Shortly after my college graduation, a few friends and I started a new media company. Within a few weeks we fleshed out the concept, wrote a business plan and set out to seek financing. With a little hustle, I managed to get us a meeting with a well-known investment firm to discuss the opportunity. Even though our business had yet to bring in a single dollar, and none of us had ever been the CEO of coffee shop let alone a multi-million dollar enterprise, we were all confident that we had a sure thing on our hands. After all, our financial projections forecasted gross revenues of $200 million. What investor could say no to that?

We’d be rich. All we needed to do was raise a small amount of capital–$15 million.

I remember thinking, “How hard could it be?” We were obviously, naïve, foolish and delusional.

There was one small problem with our plan. None of us had any idea how to pitch an investor. So I did what any clueless entrepreneurial upstart would do: Google searched “how to pitch an investor”.

Nothing that I read online could have prepared me for what was to come. We would quickly find out that our presentation was doomed before we ever set foot into the meeting. In reality, it was doomed before we started writing the business plan.

At the beginning of the meeting one of the investors asked me to hand him a one-page executive summary review. I hadn’t prepared a summary, so I handed him the first 11 pages out of the binder encasing my 95-page business plan. Strike one.

Less than four slides into my 32-slide presentation, the second investor interrupted me and said, “OK. Stop. I get it. You definitely don’t need $15 million.”

Defending our business plan, I overconfidently replied: “It can’t be done for less.”

“Really? It can’t be done, huh?” he responded with a smirk masking a hint of laughter. Strike two.

Both of the investors then proceeded to hit us with a barrage of questions:

“How much money have you personally put into your business? Anywhere near $15 million?”

“How can you possibly substantiate gross revenues of $200 million in year three?”

“Why are you trying to produce, market and distribute 10 products at the same time before you see if a single one sells at all?”

The questions went on and on. None of our answers were favorable. Strike three.

As you might have guessed, I didn’t walk out of that meeting with a $15 million check. I later realized, however, that this was one of the greatest educational experiences of my young career. I learned more about real-world fundraising in 30 minutes than many entrepreneurs learn in a lifetime. To this day, whenever I pitch investors for capital, I always remember these six hard-learned lessons:

1. Less is always more.

An elevator pitch is vital. Verbose presentations and lengthy explanations will not impress investors, and most likely will turn them off. Present your business in a manner that’s short, sweet and to the point. Investors need to be confident that your business will attract and retain customers. If they don’t grasp your concept in a short time span, they may presume that customers won’t understand it either.

2. Never hypothesize. Execute, execute, execute.

Inspire confidence with facts, not fiction. Most investors seek out low-risk businesses with proven managers that are as close to guarantees as possible. A company with cash flow, a track record and real-world experience has a better chance of getting investors than a business plan forecasting large returns. Find ways to test your business’s viability on a shoestring budget, and turn your idea into a functional business before you seek investment.

3. Leave the hockey sticks on the ice.

Excite investors about your big picture, but be reasonable and responsible. Avoid hockey stick projections. Respectable investors will not take you seriously if you present them with nonsensical financial graphs that claim your company’s revenues will grow from $100,000 to $50 million in three years. Show investors that you have a grasp on reality with three versions of financial projections: best case, moderate case and worst case. Base each of these models on facts, past and present performance data, industry and competitor analyses and a series of well-thought-out, defendable assumptions.

4. Learn to love discount stores.

Being cheap is chic. In an age where spending is out of control, you’ll need to prove that you are a fiscally responsible manager who knows how to get the most out of a buck. Give yourself wiggle room in your operations and marketing budgets, but avoid being excessive. Never ask for a large salary or big-budget perks. Investors want you to be in a position where everything is on the line.

5. Rome wasn’t built in a day. Your business won’t be either.

Investors are wary of funding over-eager businesses that seem destined to bite off more than they can chew. Before asking for millions of dollars to fund 50 divisions and hundreds of product lines, prove how well you can create, manage and fulfill demand for a single product. Demonstrate that your business can crawl before you say it can walk. Perfect your marketing tactics, sales strategies and operational procedures. Investors appreciate companies with sustainable step-and-repeat business models that are poised for exponential growth. Remember, even Google’s success is based on a single product.

6. Choose not to be the smartest person in the room.

Know what you know, know what you don’t know and find the people who know what you don’t know. Build a team of credible experts. The smartest leaders in the world are those who surround themselves with smarter people. Investors are funding a management team as much as they are investing in a great business concept.

Are you a young entrepreneur with a unique venture? Email Scott about it at pitchme@askgerber.com.

Scott Gerber is Entrepreneur Magazine’s Young Entrepreneur columnist, CEO of Gerber Enterprises and founder of AskGerber.com. Visit AskGerber.com to find out how your business can get featured in Scott’s new book, Never Get A Real Job. For information on speaking engagements, media appearances or Gerber Enterprises’ portfolio of businesses visit www.GerberEnterprises.com. Follow Scott on Twitter @askgerber.

Taking a personal inventory and assessing your current resources will save you time and money! If you’re going to go into business for yourself, one of the best things you can do is know what you’re getting into and whether you have access to the resources necessary for you to succeed.

Entrepreneurs always underestimate what they will need to start their businesses. Honestly, anyone can start a company. But only a small percentage of those who try manage to build successful firms. In one way or another, the reason for failure usually comes down to resources. Businesses that fail most often do so because they lack money, industry expertise, or a viable strategic plan. These are all inputs, or resources, whether they are intellectual capital (knowledge) or monetary capital.

Use this chart (to the left) to take a personal inventory of your resources as they apply to starting your company. If you do not yet have your business concept solidified, use the chart to identify how well equipped you are to be in business in general. (For example, under “knowledge” assume that you will need to know how to manage money, create financial statements, have some management or entrepreneurial experience, understand a particular industry, have a better-than-average skill that you will use, and so forth.)

As soon as you have nailed down your business idea, recreate this chart and do it again. You might even want to keep it around while you’re in the planning stages, updating it until you feel confident that you have the key resources that you will need to begin.

Feel free to add more resource categories and, if possible, in the description/specifics column, order according to importance, giving each item its own line. Then simply check off the appropriate boxes, identifying how accessible each resource is to you right now. It is important that this list reflect your present situation so that you don’t neglect something that you need to learn or obtain.

Study the completed chart carefully and update it regularly. You may want to recreate it on a piece of paper, draw it on an erasable board, or put it on a spread sheet so that you can more easily edit it. It can be of enormous help to you in starting your company the right way, the smart way.

Living the life of an entrepreneur is exciting, challenging, rewarding and fun, and when it comes time to take your ideas and business to the next level – choosing the right team can make or break your path to success. Finding the right people to partner with or hire isn’t easy, so here are some things to look for as you assemble your own dream team:

1. SYNERGY: I know it’s a buzzword, and I’m not real big on buzzwords, but synergy is the #1 thing to look for when picking your startup partners.  Unless you’re starting an accounting firm, there is very little reason for an accountant to form a partnership with two accountants who have no other major business skills.  You want to find people who compliment your skill sets, and fill in the gaps that will be crucial to your business.

2. TRUST: No matter how good of a job you do at picking your partners, there is always the potential for something to go wrong.  People change, situations change, and people have a tendency to behave differently when money starts rolling in, so you may not be able to foresee the future in that regards.  However, if you are even remotely uncertain about the trustworthiness or the ability of your partners to get the job done at the onset of starting your business, my advice is to protect yourself the best way you can by not getting involved.  No level of intellect, experience or dedication is a substitute for honesty and trust in business.  And, your intution is usually stronger than you think.

3. EXPERIENCE: This is a tough one, because many fantastic businesses have been started by young people with a big brain, a dynamic personality, and very little business experience.  However, the people who can make that happen the first time around are few and far between and you will likely have to have a certain level of experience in business to avoid common pitfalls with your startup.  If you don’t, you will be best served by partnering with someone who can help you in this area.  Or, if you are the person with all that experience, you might be fine to pair up with someone who is young, energetic, and eager to learn from you.  Either way, make sure your leadership as a whole has enough experience to get you through each of your crucial business stages.

4. COMPATIBILITY: Simply put, some people get along and some people don’t.  I’m a pretty good guy and I think all of my friends are pretty good people, too.  But, that doesn’t mean that all of them get along with each other, even though I get along with each of them just fine.  Some people are Type A or B; some people are a Type that deserves a letter further down the alphabet, if you get my drift.  It’s important to pick people you get along with for your partnership.  Later, you can’t expect every employee you hire to be your best friend.  But, when you’ve got 2, 3 or 4 people starting a business, you’re going to spend a tremendous amount of time together.  If you wouldn’t spend an hour or two at a bar or on the golf course with each of your partners, chances are, 14 hours crammed into a proposal writing session is going to suck.  Make sure your personalities are compatible and you should be fine in this area.

There are a lot of things to consider when choosing partners for your business, but I think these four sit at the top.  If you have any other criteria you think deserve a place in the Top 5 or 10 , I’d love to hear about it.

Joey Flores
EVP of Sales and Marketing, StartupArmy.com

Startup Army is a team of consultants highly-trained in turning ideas into products, sites into conversion machines and platforms into profits. Our team can turn a concept into a scalable product design, develop it, create your marketing roll-out strategy and execute on it while training your team on how to take over when the dust settles.

In an inspiring article about young entrepreneurs, Kimberlee Morrison shares the success stories of a few ambitious teens that turned their dreams into a reality by starting their own business.

In this short excerpt from the article, Jen Kushell shares her advice for young people who are curious about starting a business:

“You might lose the allowance money you invested, but you’re not going to lose your house. You have the flexibility to make a lot of mistakes when you’re a child entrepreneur, which in the end makes you a better business person, says Jennifer Kushell, president of YSN.com (Your Success Network) and author of the best selling book Secrets of the Young&Successful: How to Get Everything You Want Without Waiting a Lifetime.

“If you start a business when you’re an adult, you have to be a lot more strategic about what you’re doing and about what you’re putting at risk…the things you could be sacrificing,” Kushell says. She added that when you’re a kid or teenager, you’re usually the only one affected by your failure. “You can pretty much recoup anything you loose in a summer’s work.”

“Being a successful entrepreneur also means getting comfortable with failure, says Kushell. As a business person you’re bound to make mistakes, but every mistake teaches you something. It’s important to get past the fear and take the first step toward starting your business.”

Read the Full Article

Jennifer Kushell is President & Co-Founder of YSN.com – Your Success Network and Author of NY Times Bestseller Secrets of the Young and Successful.

During college, I knew that I was meant to do something special with my life.  After graduating, my best friend from high school and I decided to do something crazy: start our own internet business.  Neither of us technically knew how to build a website, but we had passion and a vision we needed to see come to life.

Over the course of two years, we worked in a downtown office in our hometown of Cleveland, Ohio, traveled to over 40 colleges to speak to students, and became entrenched in the college and young professional market.  The website we built eventually evolved into Zolio.com.

While I had never dreamt of owning my own business, the thought of creating something on my own, that I had complete control of, was exciting to me; it made me think back to the days where I often wondered about doing something more than just a “9 to 5.”  Starting Zolio was difficult and pushed me to my limits, but it has also been the most rewarding experience of my life.  One of my favorite quotes’s to help explain starting a business is: entrepreneurship is a different way of looking at the world.  Although I sacrificed weekends, put relationships on hold and even had to move back in with my parents for awhile, I don’t regret any decision I ever made with my company and have learned more than any text book could ever teach me.

Currently, I am the CEO of Zolio and run the company with my business partner, Julie Fink.  We are raising our next round of funding and exploring options for new offices on the west coast.  Back in my college days, I never thought my life would be where it is today, but I couldn’t be happier.  Feel free to contact me with questions about entrepreneurship, business or anything else on your mind: andria@zolio.com

My advice for finding success:

1. Realize what you were meant to do. I love being an entrepreneur, but it’s not for everyone.  Explore different roles or positions to see if you’re better suited to climb the corporate ladder or create one yourself.
2. Know your strengths and weaknesses. I’m a firm believer that we were all “meant” to do something specific with our lives, but without realizing what you’re truly good at, you’ll never truly be successful.  I suggest taking personality assessments and reading books to help you realize where you’re best suited in life.
3. Work hard, and enjoy yourself. Nothing is easy, so working diligently is an important tactic to reach success.  But if you don’t enjoy what you’re doing, or take time for yourself, you’ll get burnt out.  Make sure to take time to relax, spend time with loved ones and enjoy the sunshine.

Andria Trivisonno is the Co-founder of Zolio & Internet Enthusiast.