As several top tier investors have stated recently, we are moving towards a market where it is going to be much more difficult to raise capital. For that reason entrepreneurs need to be more prepared than ever to close their financing rounds with success.
With this in mind, great founders that inspire sophisticated investors to bet on them have several traits in common and ways that inspire trust and confidence to investors. I was having a conversation with Alejandro Cremades, Founder of OneVest and author of The Art of Startup Fundraising, he shared with me some fantastic tips. Below you will be able to find some of them. Feel free to add suggestions on the comment section.
1. Shared values
When founders know they are responsible for a team of people, they understand how important it is to raise the bar even higher.
Business and their employees are a reflection of themselves, and if they make honest and ethical behavior a key value, the team will follow suit and everyone else inside and outside of the company will notice. They also make sure to promote a healthy interoffice lifestyle, and encourage their team to live up to these standards.
One recent example on how to run a company is Jeff Weiner from LinkedIn. After disappointing earnings he gave a talk to employees during an all hands meeting where he stated "We are the same company we were the day before our earnings announcement," Weiner, said on stage. "I'm the same CEO I was the day before our earnings announcement. You're the same team you were the day before our earnings announcement."
There will always be ups and downs in the process of building a company, especially when you are dealing with the rollercoaster of fundraising, but the statements from LinkedIn's CEO demonstrate the importance of being able to focus on the vision and execution which ends up creating a bulletproof culture.
2. Mastering the art of listening
One of the hardest things is to be able to master is the art of listening. Being able to clearly and succinctly describe what you want done or need is extremely important especially when founders are having conversations with investors. For that reason you need to be effective with your communication and that is something that leaders do. They listen before they speak.
Listening is not something founders should just do with employees or investors. They should do it with every single partner, distributor, etc. Take as an example Howard Schultz. The CEO of Starbucks had a memorable moment during a shareholders meeting when he replied to an existing investor that was asking certain questions concerning the company's operations with regards to diversity and gay marriage. It was so powerful and inspiring his response that he got everyone in the room as instant supporters.
With the example above if you combine listening with being authentic the sky could be the limit.
3. They are grounded with the numbers
How do the sunk costs, manufacturing and production costs, and overhead stack up? How will profit margins and the amount of cash required impact the potential for success, and future returns? These are some of the questions leaders need to know how to answer when raising a round of financing. It is impossible to run a business if you don't know your costs, runway, etc.
One of the stories that 2015 left us was Zirtual. In August 2015, Zirtual laid off its 400 employees in the middle of the night via an e-mail. CEO Maren Kate Donovan later said the numbers were messed up and the company had over-staffed without having matching demand.
4. Understand strengths
Great founders understand their skills as well as their weaknesses. With that being said, a great leader knows when it is time to hire top tier talent and fill in the blanks. They follow what Jim Collins states on his book "Good to Great" about being able to have the right people seated on the right seats of the bus in order to find the direction that will make the business a success.
Ask Joe Kraus from Google Ventures as an example. Via an interview to Techcrunch he stated that his #1 rule is to "invest only in teams that don't need you."
In addition to having that level of awareness, it is also critical for all business leaders to be coachable, and to be open to learning and advice. This is especially true for entrepreneurs who face constant evolution into new territory.
5. Good amount of confidence
There may be days where the future of a brand is worrisome and things aren't going according to plan. This is true with any business, large or small, and the most important thing is not to panic. Part of the job as a founder is to put out fires and maintain the team morale.
By staying calm and confident, leaders keep the team feeling the same. Teams will take cues from the founder, so if you exude a level of calm damage control, your team will pick up on that feeling. The key objective is to keep everyone working and moving ahead and that would help in achieving milestones that would get investors excited.
Having a great idea, and assembling a team to bring that concept to life is the first step in creating a successful business venture. While finding a new and unique idea is rare enough; the ability to successfully execute this idea is what separates the dreamers from the successful leaders.