How Do I Find Investors If I Don’t Have Cash Flow?

The first hard lesson that inventors learn is that investment funds, such as VCs and Private Equity funds, love to hear you pitch but don’t invest. They can’t. They won't always tell you that, but in many cases, their incorporating charter or (in some cases) the Regulatory ACT by which they incorporated requires that they only invest in cash-generating entities.

If I were to share what I consider the five most critical selection criteria for structured funds, it would include (1) strong regenerative cash flow with substantial growth, (2) potential to 10X the proposed investment, (3) working within their area of expertise/industry, (4) founders they can work with, and (5) a clear exit path that founders can support. ?Let's break this down a little:

CASH FLOW: not just cash coming in, but growing cash flow coming in, and each source can be repeated for additional cash flow.

GROWTH: this can be explained by the VC representative reaching the conclusion that if the VC were to tip in ten times the equity, they could generate 100 times the output – or more. If your project cannot prove the investment would unlock another (significant) level of growth, they have other projects that can.

FIELD OF EXPERTISE: If the VC was in the aviation industry, they could use their expertise, contacts, skills, and history within that industry. This reduces their risks and, by association, that of the founders. If they can make ten calls to known associates to establish a viable sales channel, they have little or no risk left.

FRIENDLY FOUNDERS: There are founders and inventors who have based their forward planning on ego, with little consideration for others. Given that most VCs have an abundance of pitch offers, this is just another reason to hit the reject button.

EXIT DEFINED: Sometimes, founders want to grow with their projects and remain in charge. They forget that their innovation skills are not the same set of skills needed to run a high-growth company that needs careful budgeting and financial controls in order to feed this growth. Most inventors and Founders cannot come to terms with the fact that their inventing skills are usually the reason why they fail at commercializing, given that they are in themselves completely separate and not transferrable.

If you are a founder or inventor and you want to fund your project from Ideation all the way through to pre-scale (when the VCs will be able to see the cash flow and their other selection criteria), then you have to re-think your approach to capital-raising.

Here is a short video to explain why this is relevant to you. https://youtu.be/vaeLd-0aH14

In less than two weeks, I will be running another of our webinars, this time focusing on the funding aspects of IP commercialization. If you would like to be one of our 99 guests (for free), here is the registration page:? https://calendly.com/danielinperth/what-invents-need-to-scale-their-projects

See you on the Webinar! It will be 60 minutes of content, followed by 30 minutes of Q&A from members of some of our 2024 Cohort members. Have your questions ready!