Video Transcript

00:10 Melinda Emerson: So what we're gonna talk about today is really about how to get your plan ready for growth. So, Heidi, I wanna start with you.

00:18 Heidi Messer: Okay.

00:19 Emerson: What do you need to have in place if you think you're ready to scale your business? What kinds of things do you need to have in place?

00:28 Messer: I think the most important thing is to have a plan, right? And a plan that's very, very, very focused. So the hard part of growth is you can't really plan for the growth part because that's the timing of the market, but you can know where you wanna be and what steps you need to get there. So if things happen faster or sooner than you thought, okay, well, then I need to staff up in this area and I need to go after that opportunity 'cause it's here. Or if something slows down, where you can conserve and pace yourself and find a different path to get to your end goal.

00:58 Emerson: That's very helpful. So she said... You guys heard what she said. She said, "You have to have a plan." Now...

01:03 Messer: Plan.

01:04 Emerson: Alexis, I wanna talk to you about... Okay, so I'm getting my plan together, but I don't have the money yet.

01:11 Alexis Maybank: Mm-hmm.

01:12 Emerson: So if I've got limited resources, I know I'm ready to grow, I've got some good customers, what is it that I should be focusing my limited resources on as I'm trying to get this business to grow?

01:25 Alexis Maybank: Sure. And with Gilt Group, we raised seed capital, we raised about four rounds of venture capital as well. So it's something that I'm very familiar with and a couple of things I'd really recommend. One is think about the milestones that you need to reach to show that your business is gonna have legs, whether it's a certain number of customers or a key account closed, a certain key hire. Figure out what are the three or four key milestones that you need and invest to get there because that shows proof that your idea could take off, it could be a big business, it could be a billion dollar idea. And the second is, the team is so critical. Ideas are out there, ideas are effectively somewhat cheap, it's all about the execution. I believe that having the right core team to go after the idea is the most critical thing from investor standpoint. So they're gonna assess the individuals that you've been able to bring together, that you brought together as part of the core team or the founding team, and they're gonna want to make sure that they're not just the right team to carry it forward with complimentary skills, but it's a well coalescing group with complimentary personalities too that will work really well and really effectively together.

02:41 Emerson: Okay, so I have a follow-up question for you on that.

02:43 Maybank: Sure.

02:43 Emerson: Okay, so the team is important. So if I haven't gotten my investment yet though, how do I get those people that I need that... Maybe at a higher dollar mark than I can really afford? How can I do that?

02:59 Maybank: With Gilt Group and in the past too, a few things that I've always done... Anytime that you can work with colleagues or past acquaintances that you have that are more willing to take a leap of faith, it's always a little bit easier. But with every individual I'm speaking to, I would, knowing that there's limited cash, I'm always putting into play equity and cash, and often I put it on a sliding scale where there's a lot of benefit in being an owner in a small business that has high potential for growth. So I ask people to choose, would you rather be up on the equity scale which means you're compromising more in cash, at least for the first year or two, or is cash more critical for this moment given family obligations or anything else? So looking at that sliding scale, and you'll be impressed by, with the right vision, with the right potential for the business, the amount of people who actually wanna be higher on the ownership, higher on the equity scale, and it makes it more affordable to get the team that you need off the bat.

04:01 Emerson: Now, Heidi, when you think about growing a business...

04:05 Messer: Mm-hmm.

04:06 Emerson: We're always talking about money, right? I mean it comes down to pesos, right? So, what I wanna hear from you is if I know that I need an investor for my business, what do I need to do and what kinds of things do I need to ask that person to make sure that they are the right partner for me and my business?

04:27 Messer: I think it's a great, great question because getting investors is almost like getting married, right? They see the good, the bad, and the ugly going forward and you really, really, really wanna pick your partners before you get in bed with them, so to speak. So, at LinkShare...

04:42 Emerson: You mean, you need to date first.

04:44 Messer: You need to date first.

04:44 Emerson: Okay.

04:45 Messer: So at LinkShare, we had four different types of investors. We had an angel investor who was board member, we had a big corporation which was Comcast, a big cable company, we had a venture group which is called Internet Capital Group and we had an international conglomerate called Mitsui. So I feel like I can speak to the range of options on that front. We did not take in any loans which is a whole separate type of capital, and I think the first step would be to decide what kind of money you want because the people that put money into businesses, be it banks or venture capitalists or angels, have an agenda that's solely theirs, and you wanna really make sure that their agenda meshes with your agenda. So if your idea is you're gonna be a billion dollar business in technology, for example, the chances of you being profitable year one, two, three, maybe even five are very, very small, and that's not gonna be very appealing to a bank, right? And the things you would do to make yourself look appealing to a bank would actually undermine your business vision entirely.

05:46 Messer: So you probably can eliminate a whole group of people that you're gonna waste time talking to. On the flip side, if you know that you need capital immediately and your business is going to show profit relatively fast with an infusion of capital, then that's a whole different type of investor and those are the kind of people you wanna talk to. And once you limit it down to that, I think you wanna start talking to everybody who... They've ever invested in because you'd be surprised at how open people are to talk about what their investors are like. I've had people do reference calls on investors we had in the past and I tell them, I tell them honestly my experience with them which, in my instance, fortunately, was very good. But I've had instances where I've called for references on other investors that we've chosen not to do business with because of the things I've heard.

06:30 Emerson: So, you're saying that the research and asking them for references, and how long should you take to select an investor? How long should the vetting process really be?

06:41 Messer: So, I think going for investors is a full-time job in and of itself, and I think Alexis can probably speak to this better than I can. Your business actually suffers for it because the amount of time it takes them to get to know you, and you to get to know them, you're not running the business. And, in most businesses at an early stage, you're probably doing about five jobs. So, to take on a whole other job that's unrelated to the growth of your business is unfortunate. So, anything you can do to short cut that process at the frontend, to eliminate people who will sit and take meetings and really not be appropriate to put money in your business, is time well spent. But I would say probably about six months is the minimum time it takes to get a really qualified investor that you want in your business, and I would not wait until you need the money, I would actually plan way in advance for getting it because everybody I've spoken to, even people that raise money on PowerPoint presentations, it still takes several months to get it closed.

Published on: Oct 27, 2012