In this podcast, we have a chat with Sean Sheppard, co-founder of GrowthX and GrowthX Academy and serial entrepreneur VC, about his experiences with venture capital, and the mindsets that lead to success for a company, and the ones that ensure a company will never truly take off.
We discuss topics such as the problems many start-ups face in the seed stage when they have the least capital but need the most help, the importance of consistency with the quality of your products and thus your brand expectations, and the necessity of a focus on human to human interaction and experience that will allow you to find a profitable business model.
With any business venture, it’s essential to have an open mindset regarding growth and learning as opposed to a fixed mindset. Feedback is a gift and if you can look for patterns across your feedback and make the appropriate adjustments in response, what you learn will lead to revenue.
If there’s one piece of advice any new start-up should live by, it’s that the best form of selling is human to human, not business to business. Your passion is the main thing that will compel investors to put their money into your venture, and if you’re not passionate about your product or service, then you can’t expect anyone else to be.
It’s also worth remembering that it’s your insights which will drive your success, not the technology behind your business offering. You have to start by identifying a gap in the market and a problem which has real value attached to it, something which you can find the solution to and monetize. People want you to solve their real-world problems, and you find those problems by going out and talking to people and businesses.
Predictable, Profitable, Potentially Scalable
You need to develop a business model which is predictable, profitable and potentially scalable, if you want to succeed in securing seed funding. Predictable means you can forecast how the figures will pan out in order to make the venture profitable, while investors like to see a business is potentially scalable and will grow and develop over time to deliver a return on investment.
In the beginning, you need to really get to know your market in order to identify the problem you’re going to solve. Revenue is less important at this stage, and what really matters is that people give you their time and truth – you need their honest opinions on what they want from you and what issues they would like to see fixed.
Before you even start considering building anything, you have to ask questions and work out exactly what it is you need to build. If you’ve not done the market research beforehand then the whole exercise will be futile, as your offering may not meet people’s demands and therefore won’t sell.
Ask the right questions
Getting to know your market inside out is the only way of discovering where your entry point is, that little gap your company is going to plug. Securing venture capital relies on your ability to prove that your product or service is needed and people will buy into it, which means asking the right questions of the right people.
The more time spent talking to the wrong people, the more time you waste. Get to know and understand your market, and by talking to them before you start to build, you help generate the good will and positive feedback which will stand you in good stead when you eventually launch. You’re going to need that traction because whatever the market you target, it’s going to be crowded.
Target the right people
Early funding is all about targeting the right people, but before you even think about approaching investors, approach your friends and family first. The people who know and love you are more likely to help with that initial funding, however small the amounts they can give. Having a little money to your name makes it easier to approach investors.
Before you do so, however, take a little time to draw up an ideal investor profile. Who will invest at this early stage? What is their track record like? What do they care about and look for in a business opportunity? Once you’ve pinpointed the ‘right people’, draw up a compelling but succinct pitch which centers around your company’s narrative, or the ‘why’ behind your business and what it does.
Experience is the key
Experience is what you get when you don’t get what you want. That’s a motto to live by as you begin to chase investment, because there will always be knock-backs and disappointments. The key is to treat them as a valuable experience and life lesson, and learn from them so you an improve in the future and make your pitch even stronger next time around.
While a lot of business is about facts and figures, there’s always an important role for gut instinct to play. If you get a good feeling about someone then it’s worth trusting it. Remember, ideas for products are everywhere, but good people are hard to find. Again, this largely comes down to experience and the more potential investors you approach, the more likely you are to hit upon the one that simply ‘clicks’ with your ideas and ethos.
The big takeaways
When it comes to hacking venture capital and growing your start-up, there are a few simple rules to follow. The first is to trust your instinct when it comes to people and work with people over ideas. Secondly, focus on the problem and not the product first. You can start to build at any time, but before you do, you need to know precisely what it is that is required of you.
Third, focus on learning, feedback and experience, and put them all to good use. Finally, learn to accept that the majority of ideas you take to market will be wrong. Going back to the drawing board is not something to be ashamed of because it shows you’re developing your thinking and growing as a result.
Choosing projects of passion – those which benefit you, your family and community – will always yield better results than projects purely undertaken for financial gain. People often buy into your enthusiasm more than they do the numbers, so make sure your big idea solves a problem you truly care about.