What do investors really want? Shelly Porges has the answers.
A past speaker at Inspirefest 2015, Shelly Porges is a sought-after strategy expert, serial entrepreneur and investor as well as managing director of Reservoir Q Global LLC.
Porges also worked closely with former US secretary of state Hillary Clinton. During her time working with Clinton, she held the title of senior adviser of the Global Entrepreneurship Program, previously launching the US state department’s Global Women’s Business Initiative, promoting women’s entrepreneurship on a worldwide scale.
Porges returned to the Inspirefest stage this summer to offer words of investment wisdom, backed up by decades of in-depth entrepreneurial experience.
‘An investor only wants five questions answered: what problem are you solving, how big is it in dollars and customers, what makes your solution unique, what is your go-to market strategy, and how much profit and impact will you have?’
– SHELLY PORGES
Facebook, Amazon, Apple, Google. Porges rightfully singled out these companies’ funding stories as the stuff of legends.
Think about it: in 1998, would you have invested in a company that had previously been known as BackRub? Google investors did. Would you have invested your life savings at a high risk, as the parents of Amazon founder Jeff Bezos had?
Although they’re heralded by new companies as roadmaps to success, Porges argued that these fairytale funding stories can sometimes damage perceptions for young entrepreneurs.
“With these stories comes the illusion of how easily these founders raised venture capital for their first companies, long before anyone knew they would become world-changing unicorns.
“For every one of these stories, you have to know – and I’m sure you do know, and you’ve read about the fact that there are thousands of other less successful [entrepreneurs] that never got there.”
She dubbed these budding CEOs ‘wantrepreneurs’, and said that it’s important to realise that Bezos, Zuckerberg and Jobs all had their bumps in the road, too.
Porges then set about debunking five of the most common investment myths.
1. Investors will think my idea is cool, just like my parents did
It doesn’t matter how good your idea is, and how many friends, aunts, cousins or uncles are full of praise for your product. Customers are where it counts, according to Porges. Investors want to see people lining up to buy your product. She continued: “If it’s not solving a problem to a point that people are willing to pay for it, it may be a cool idea but it’s just not a business.”
2. More female venture capitalists mean better funding prospects for women
Porges noted that although the venture capital arena is becoming friendlier for women, equity has certainly not been achieved. She said that only 4.7pc of new capital that gets invested is controlled by a woman, and just 7pc of top venture capitalist partners in the 100 most successful firms are women.
3. Venture capital is the only way to grow my business
Venture capital gets the most buzz, Porges says, but it’s by no means your only option. She mentioned savings, family loans, angel investments, grants and that all-important customer revenue stream as neglected funding opportunities.
For Porges, there is another funding avenue that shows immense promise, particularly for female entrepreneurs: crowdfunding. She cited two studies, one of which found that female-led Kickstarter campaigns were 13pc more likely to receive full funding than their male-led counterparts.
4. The longer my business plan, the more impressive it will look
The serial investor pulled no punches in terms of this misconception, saying: “Unlike your third grade teacher, the length of your business plan doesn’t matter at all to an investor.
“An investor only wants five questions answered: what problem are you solving, how big is it in dollars and customers, what makes your solution unique, what is your go-to market strategy, and how much profit and impact will you have?”
5. When I complete funding, I can finally return to running my business
Porges was unequivocal about warning the audience not to let their financial management slide after funding is secured. As she put it: “Nothing will tank a business faster than a business that has run out of cash.”
She concluded with a statement of belief in those small businesses trying to get off the ground. Hopefully, by following Porges’ sage advice, more of them will get to spread their wings.
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