Dr. Earl R. Smith II

Most entrepreneurs dream of the day that the investor’s check clears and they have the funding to grow their business. It is a day that they struggle to achieve. Most put in long hours of preparation. They polish and re-polish their elevator speech and dog-and-pony show. The slide stack is revised and re-revised. The diligent ones even look to their own performance and appearance during the presentations to find ways to improve results and finally greet that sunrise on funding day.

I recently sat in on a gab fest of entrepreneurs and wannabee entrepreneurs. The subject of investors and how best to approach them came up and I was taken aback by what I heard.

“So what are we going to talk about this time?” The question had a bit of an edge. I could tell that she was apprehensive about the focus of the next hour. Our last session, a week past, had highlighted a basic problem in her approach to investing.

It was one thing to reach an agreement on the focus and goals of the coaching engagement but another to actually kick the process in gear. I could tell by her body language that the CEO was nervous about getting into the thick of things.

Towards the end of my session with the CEO, she asked me to propose an engagement focused on fixing the problems which we had been discussing. “Help me drive the ‘of course’ beast off the field,” was the way she put it.

Many of my engagements begin with a phone call from an investor. Most often they are concerned that the company they funded is in real trouble and/or is teetering on the brink.

When I first started this series of articles I had no idea that it would extend to seven. I also did not anticipate the level of interest in the topic. Many who read the opening article had not thought of the question ‘how does my company stack up against a professional definition of investment grade’.

The objective of this series has been to describe the characteristics of a company that make it attractive to investors. The series began with the realization that many entrepreneurs sometimes do not have the ability to see their company through the eyes of the people they are hoping will fund it.

In this installment of the series I want to focus on exit strategies. The first and most important thing to realize is that the expectations and, indeed, objectives of investors are necessarily different from those of the management team.

Generally these and many more questions have to be answered satisfactorily before a professional investor turns to the financial projections provided by the founders. Amateurs will start with them, but this is more an indication that they are amateurs than anything else.