It’s a great time to be an entrepreneur. The barriers to starting your own business are lower than ever. As a result, the number of entrepreneurs has increased exponentially. Sounds like a great world to live in, right?
The less rosy reality is that fewer businesses are making it through the early-stage growth phase. Forbes says that 80% of entrepreneurs fail within their first 18 months. They just aren’t able to take their business to the next level. Why is this happening? Many factors are at play but the reason we hear most frequently is that Founders couldn’t secure enough funding to grow the business. I would argue that, while funding is important, other factors are equally, or even more critical to early-stage success.
Traditionally, entrepreneurs have had two main options to fund their business from launch to early-stage and beyond. One route is a relatively hands-off investment from friends and family, angel investors, or Venture Capital. The other route is an injection of cash and access to short-term strategic advice and support in exchange for equity from a startup accelerator. The problem with both of these options is that neither provides the necessary capital AND the longer-term guidance to use it effectively.
We apply what we call the Smart Money model to increase Founders chances for success; investing the financial resources to help startups grow FAST and applying the strategic guidance to grow SMART. Building a business requires expertise across dozens of channels – finance, logistics, sales, technology, marketing, administration, and the list goes on. New Founders often (and understandably) lack the experience to operate effectively across the full range, nor can they afford an in-house expert for each. Smart Money investors provide a team of experts across multiple industries and disciplines, available for hands-on strategic and timely advice during the startup phase and beyond.
As a Smart Money investor we occasionally put in less capital than a traditional VC, but the value of our strategic time and experience results in a better overall return. The chances of making it to the next stage increase and costly mistakes are avoided. Working with a Smart Money partner can often feel like having a co-founder. We’re more actively engaged in the daily operations of the business than a traditional investor, keeping a close eye on performance, in order to help Founders adjust course if necessary.
Fit is key to these Smart Money partnerships – and finding the right investment relationship will pay huge dividends to both partners in the end, and along the way.