INSTANT FUNDING WEEKLY EDITION

CONTENTS

·?????? Quick Calendar

·?????? RCI Community Funds

·?????? Funding Point

·?????? SuperCrowd Chicago

·?????? Top Fundraising Voice

. Quotation

·?????? Successful Funding

·?????? Don Cohen

·?????? Business Opportunities

QUICK CALENDAR

June 18 – Successful Funding – Ron Yeager – Evaluating Investment Opportunities - 8 a.m. MDT - LinkedIn Live

June 19 - Don Cohen Show - 9 a.m. MDT - Linkedin Live

RCI COMMUNITY FUNDS

In collaboration with a number of other experts, we are forming RCI Community Funds to provide funding to local communities that are facing economic distress. Through an adaptation of the Diversified Community Investment Fund model of the National Coalition for Community Capital, we plan to start and raise capital into a series of community funds for selected communities. We seek to revitalize, catalyze, and impact communities to achieve sufficient economic activity so that these communities can rebuild. We are seeking a financial partner to fund our initial project. For more info, please contact me: [email protected]

FUNDING POINTS

A CAPITAL COACH’S PERSPECTIVE – PART 3

When I receive an investment opportunity pitch, there is often an expectation that I will give the opportunity priority, invest time to review the pitch without compensation, and immediately make a top-flight introduction based on my reputation to the perfect investor candidate without verifying anything.

I have to ask myself if the person making this request is ‘ignorant’ or ‘entitled.’

By ignorant, I simply mean that the person has no significant understanding of the capital market or huge blind spots in how the world works. In particular, there is no understanding of why and when investors invest, leading them to commit their own time and money toward a capital campaign that will probably fail.

It will be necessary for me to determine if the person making the pitch is acting without knowing what they are doing. This requires extra time in the form of a series of emails, phone, or video calls. When busy, I will not commit the time to find out. When not busy, I may arrange a brief communication. However, the prospect of bringing an entrepreneur up to speed is challenging. Worse yet, if the entrepreneur has already invested time and money in the development of their pitch, whether by themselves or with the aid of consultants, they may have become so entrenched in their capital strategy that it may take more time and money to get them on the right track.

By entitled, I simply mean that the person believes that they are the center of the universe and that everyone should feel privileged to assist them, setting aside any consideration of cost or reputation. They believe that anyone with money should give them money on the terms they have pitched regardless of risk, term of investment, or level of risk.

It will be necessary for me to determine if the person making the pitch has a sense of entitlement. This also requires extra time in the form of a series of emails and phone or video calls. When busy, I will not commit the time to find out. When not busy, I may arrange a brief communication. I will not work with a person who believes they are entitled. They represent a high risk of failure. Their constant placement of themselves ahead of everyone else will result in a series of conflicts that may escalate into a number of undesirable situations and relationships.

I have tried in the past to look past people that believe they are entitled. I may have thought they earned the right, they are a celebrity, an elected official or other person who deserved special consideration. Even if true, it did not make them the right person to develop strategy, to lead a team or perform critical tasks. Worse yet, an entitled person will never accept responsibility for failure and will throw you under the bus in a heartbeat to avoid responsibility.

It is easy to get caught up in the glamour of a rising star. It is necessary to look past the brilliance and ask the hard questions of who is doing the work?

There may be a sense that you are also entitled – even if it is to no more than a level of fairness. The older I get, the more I have to fight the sense of "It's my turn," or "Good times should outweigh bad times," or other thoughts of a cosmic balance.

The problem in working with people with a sense of entitlement is that their perception is not shared by everyone else. This creates imbalances in relationships, which will commonly lead to a breakup.

The relationships within a team are critically important. A failure by any member of the team to do their assigned work may lead to failure. When an entrepreneur pitches for funding without consideration of the person receiving the pitch they should be prepared to go pitch to someone else.

A CAPITAL COACH’S PERSPECTIVE – PART 2

As a Capital Coach I receive many investment opportunities in different stages of development from just a concept to a complete capital campaign with a fully developed plan, a set of promotional materials, back office ready to manage communications and a starting group of investor candidates standing ready to make an investment in the offer.

When a small business contacts me about raising funding, they rarely have expended any time in the identification of investor candidates that are most likely to invest. Anyone with a bank account is treated as an investor candidate with a level of equality that any democracy would envy.

I am producing a series on my Successful Funding show where I am inviting investors, coaches, and scouts to share their approaches to reviewing investment pitches. This week, Eric Hanson was my guest. Next week Ron Yeager will be my guest. You are invited to participate in these live streamed events where the audience can comment and ask questions.

With an understanding of the business case, I first consider the major question, “Who would invest in this opportunity? I start this analysis with a guess at who might be a ‘funding soulmate’ who is the most likely to invest because they need the small business to succeed in order for them to successfully achieve their goals.

A funding soulmate is actively searching for the small business as the missing ingredient in their recipe for success. In some cases, what small business fits this need is clear, and in other cases, it remains undefined. The funding soulmate is the ultimate stakeholder who may expect to benefit more outside of the investment than any return on investment dollars distributed within the investment.

In my first look at an investment opportunity, if no single investor candidate or group of investor candidates stands out as a funding soulmate, then I consider the common stakeholder groups of suppliers, resellers, customers, the team, local community, and social causes as investor candidates. If, again, no one stands out as a high-priority candidate, I will pass by informing the small business that I do not see how I can help and do not know anyone who would do so.

I do not subscribe to the fundraising approach of knocking on every door, turning over every rock, and spamming the world with an investment pitch. Most small businesses do not have the budget to conduct such an approach to raising capital. Worse yet, small businesses that engage in such a style of campaigning most often fail to attain their capital goal.

Yes, there may be an investor candidate who may invest. However, the time and energy to engage in a search for that candidate will likely require extensive time and money to find a match.

In my consideration of an investment opportunity, I have identified several reasons why I would reject a particular investment:

·?????? The opportunity does not meet my preferences

·?????? The opportunity is not comprehensible

·?????? The opportunity does not have a reasonably obvious high-probability investor candidate

On my Successful Funding show on Tuesday, Eric Hanson stated he would reject an investment offer immediately if:

·?????? The opportunity failed to demonstrate an understanding of the securities laws and regulations that govern the investment

·?????? The opportunity pitch is lacking in spelling, grammar, or other elements of professional communications

To this point, an opportunity may be rejected before considering the products and services of the small business, market acceptance, the management team or the potential return on investment. There remain many more reasons why an investment opportunity may be rejected. All of these reasons should be considered when contemplating a funding campaign, targeting investor candidates, and crafting an investment offer.

A CAPITAL COACH’S PERSPECTIVE – PART 1

Most investment opportunity pitches are targeted at no one, are incomplete, or do not fully communicate the opportunity. As a result, the capital campaigns are unsuccessful or only raise a portion of the capital goal, while the small business wastes time talking to investor candidates who will never invest or who will turn the proposal for lacking credibility.

I am producing a series on my Successful Funding show where I am inviting investors, coaches, and scouts to share their approaches to reviewing investment pitches. This week, Eric Hanson was my guest. Next week Ron Yeager will be my guest. You are invited to participate in these live streamed events where the audience can comment and ask questions.

When an investor pitch crosses my desk, I have my own approach to reviewing the opportunity. I do invest occasionally in opportunities, although my investments are largely in-kind investments of my services. However, my approach is a ‘capital coach’ where I see my primary role is to see if I can contribute to conducting a successful capital campaign.

I, like investor candidates, look for flaws in investment pitches. However, as a coach, I have a larger and longer list of flaws that I will consider without an outright, immediate rejection. I give thought to whether or not the flaws may be fixed. I know more funding sources than most people. I give thought to whether one or more of these sources may be a ‘workable’, ‘best’ or ‘optimal’ fit for a particular investment opportunity.

I already have a full plate of funding projects. I receive funding proposals all the time, multiple times per week. This means that not every funding proposal receives the same amount of consideration. In the same manner that an investor will only fund one or more selected opportunities, I will also limit time to reviewing opportunities and only work with those where I believe I may make a significant contribution and which align with my interests.

Every investor has preferred interests. They may have expended time assessing and analyzing their interests which they can clearly communicate or, on the other end of the extreme, they have made no effort and will ‘know it when they see it’. If possible, a small business should know their interests. I have an interest in community improvement and economic development that typically takes the form of providing funding or launching new businesses or industries. Often, a new technology captures my attention because its application may have far-reaching benefits.

After filtering through the investment pitch for topics of interest, I look to my ability to rapidly understand the totality of the investment. In most cases, this is not possible. The small business or community project has submitted the entire investment package, or the pitch is no more than a request for dollars.

In the first case where I have received the entire investment package, it may be necessary for me to spend one to two hours to briefly review the package. Kings Crowd has studied the review process and recommends spending up to 40 hours to complete due diligence of a single investment opportunity. I will not do that. I do not have the time. I will not invest my time. I do not have time to invest in something I do not know anything about. Submitting a full investment package to someone in an initial presentation of the pitch fails pitching etiquette – see yesterday’s edition of this Instant Funding newsletter – in that it disrespects the investor candidate recipient. Disrespect leads to a loss of credibility. Why would an investor candidate think that a small business leader will best manage invested funds if he or she fails to respect the time of others? The initial contact with an investor candidate should be a one-page document or slide deck equivalent that quickly frames the investment opportunity so the investor candidate can make a quick determination of interest and key deal elements.

In the second case, where the pitch is a simple request for dollars, there is no ability to determine what the investment is all about. There may be no information about the business opportunity, the products or services, market acceptance, or the qualifications of the management team. I reject these pitches automatically. They demonstrate that the management team is solely focused on themselves, considers investors as a substitutable commodity, and does not understand fundraising or all of the above. It is possible that the investment is a great deal, but I have no time to explore the opportunity, and the management team has flunked out like it is on a game show where the contestant misses the first question. Like the game show, there will remain a large number of contestants, so first-round flunkouts are not missed.

All of my comments fall within the accepted statements that ‘The first impression is the most important impression’ and ‘You never get the chance to make a second first impression.’

This is just the beginning of my review of an investment opportunity pitch. I have several more hurdles for a pitch to pass. All of these hurdles must be passed quickly or placed on a stack by my desk or in a digital folder that I will rarely have time to consider later.

GOOD INVESTMENT OR BAD – PART 3

I see many investment opportunities every week. I am continually sorting through these opportunities, looking for those that are good or bad. In my evaluation, recognizing that the investment involves the future, I have to discern between fact and fiction and reality and fantasy.

Yesterday, on my Successful Funding show, determining the viability of an investment opportunity was the subject with my guest Eric Hanson. We started working our way through each of our personal checklists as we looked at an investment opportunity for the first time which would cause us to decline.

Even though we both look at the same things, we have different preferences or things that we think are more important, and we will check for first, second, third, and so on.

One of the things that is high on my list is the reality of the opportunity. By this, I mean, “Is the projected future of the business probable? As described in the Instant Funding edition on Monday, I look at (1) the solution to the problem, (2) market acceptance of the solution, and (3) the management teams’ capabilities of operating the business. I want to know that each of these key components is real.

I have been pitched and worked with many innovations which were never able to develop from concept to a final product or service that performed any measurable benefit or whose ultimate cost of production far exceeded any price point anyone other than a government agency might pay. There are countless examples of technologies that work on the bench in a very controlled or minimal environment, and that will not work in the hands of a consumer. There are even more reasons for the failure of a technology in design, production, and distribution that may be fixable, but the business was unable to get more funding to recover from its original misstep.

There are many products and services that are needed by customers that are never purchased in sufficient quantities within a short enough time for the business to become profitable before it runs out of funding. The lackluster response to an offering of these products and services may be due to many of the same reasons that an investment offer is declined: the customer is not aware of the product or service, does not understand the product or service, and therefore is unable to appreciate its value, does not view the product or service as superior to another offering, cannot currently afford to purchase the product or service, or is put off by the manner or place where the product or service is presented for sale. Even when faced with a clearly demonstrated value that squarely addresses an unmet need, a customer candidate may say no.

The management team must be capable of bringing its product or service to market within all of the challenges of funding, government regulation, competition, and the complexities of operating a business. Some people work well by themselves, but not as a team. Some teams are comprised of people with different agendas. The team may not have all the skills needed. More commonly, the team has little or no experience with the product or service or with the customers in the market. Their prior experience, if any, does not translate into sufficient capabilities to do everything a new business may require to be successful.

When I do the ‘first look’ at any information about a business, regardless of whether it is seeking funding, I first ask myself if I believe the business will be a success based upon a solution accepted by a market with management. With forty-five years of experience with hundreds of businesses, I have seen enough failures to consider myself a good judge of what will work and what will not. This is a reality check. I then look at the projections of future sales, profits, and profit allocations to see what an investor may realize. In many cases, I may find the business is okay, but the anticipated growth and profitability of the business are not realistic.

I will find it hard to believe that an innovative product or service that requires that the customer change how they do anything can be brought to the market by a solo entrepreneur with no prior business experience at any level of scale. I am not saying it cannot happen. I am saying the odds of success are so low that I will not bet on it by making an investment.

It is recommended that any offering documents be field tested before seeking funding by sharing them with people with experience in business and funding. Get their honest feedback, however harsh it may seem, before committing to all of the time and expense of conducting a capital campaign.

GOOD INVESTMENT OR BAD – PART 2

I see many investment opportunities every week. I am continually sorting through these opportunities looking for those that are good or bad.

Earlier today, on my Success Funding show, determining the viability of an investment opportunity was the subject with my guest Eric Hanson.

Most people look at investment opportunities solely from the perspective of an investor candidate. Should I invest or not? Yesterday, I walked through this perspective of how I look at investment opportunities. It was pointed out to me that within the presentation, I never included the projected rate of return on the investment (ROI).

I, like all investor candidates, have an expectation that my investment will result in an appreciation of value with the outcome that I make more money than I invested. If I did not have this belief, I would never invest.? However, ROI is an outcome of the other criteria that I mentioned.

Before jumping to the end of the story, I want to know if the investment opportunity is complete. Getting to my investment destination is dependent upon having a car, a driver, and heading in the right direction. If I am missing out on any of these key components of a business, there is a risk that the business will fail. Failure does not have to be total for me to not meet my expectations.

In describing an investment, there is a cause and an effect. The effect, or return on investment, is totally dependent upon the cause – solution, market, and management. The stated effect is a projection of the future that may or may not happen. The cause – solution, market, and management are today. They are the reasons for whether or not the return on investment may be attained.

It is recommended that a small business provide a statement of the projected outcome in terms of dollars returned at a set time if all of the assumptions of the small business prove to be accurate. However, since this is only a projection, the small business needs to explain and demonstrate how it will get from where it’s at to where it wants to go.

An investment opportunity must first be complete before it can be evaluated as to whether it is good or bad.

GOOD INVESTMENT OR BAD – PART 1

I see many investment opportunities every week. I am continually sorting through these opportunities looking for those that are good or bad.

Tomorrow, on my Success Funding show, determining the viability of an investment opportunity will be the subject of my guest, Eric Hanson. Eric and I started off as competitors in the new investment crowdfunding industry, offering different Colorado intrastate crowdfunding platforms. As we worked to make this new approach to investment work and to improve upon the initial Colorado Crowdfunding Act legislation, we began collaborating, which has led to today, where we look at deals together.

Most people look at investment opportunities solely from the perspective of an investor candidate. Should I invest or not? I also look at the investment opportunity from the perspective of my role as a capital coach. Can I help this opportunity get funded? It is an understatement to say how much conflict exists between these two positions. There is yet a third perspective where, as a human being, I may want the opportunity to succeed because of its potential social impact, but I find no good reason to invest and find the opportunity beyond my ability to help.

Looking at a business opportunity from the position as an investor candidate has many challenges. These challenges can be reduced and simplified if I have a set of criteria that I have established in advance.

As readers of this Instant Funding newsletter may guess, my criteria are my own. This is largely due to the fact that I may choose to invest my time (skills, experience and training) alongside of my money. The combination gives me a much broader range of investment opportunities that may meet my needs.

All investors are unique in their investment criteria because of all the differences in goals, experience, skills, training and intuition. One of the greatest mistakes entrepreneurs make is assuming that all investors are alike. Even though all investors are different, they may make the same choice to invest in the same business. Just for different reasons. If the opportunity promotion does not identify each of these reasons, the small business may miss out on an investment.

An investment opportunity has three key parts:

1.???? Solution to a problem

2.???? Market acceptance of the solution (willingness to pay the retail price)

3.???? Management team’s capability

I have left out many important criteria and included within my three key parts many criteria that some people would identify separately.

Using the illustration of the sale of a serving of lemonade, it:

1.???? Slakes the thirst of a customer

2.???? Customers have demonstrated a willingness to pay prices that can generate a profit

3.???? Some people can manage to sell lemonade as a business

Simply because the pitch of an investment opportunity states it will be successful does not make it so. An investor candidate has to review the business, the market and its leadership to assess the strengths and weaknesses of each. After completing the evaluation, an investment decision may be completed.

Even if an investment opportunity meets all of my investment criteria that does not mean that I will invest. As stated earlier, I see lots of deals. I do not have time and/or money to support all of them. As a result, I may choose to pick a different deal that I think is better (again defined by my unique criteria) or I may determine that if I wait that I will see a better deal.

There are so many reasons for an investor candidate to say no to an investment opportunity. This may make it seem like reviewing an investment opportunity is easy but working the review takes time and may require engaging experts to gain their perspective. Some investor candidates do not invest much time. For this reason and to aid all investor candidates, the promotional documents must be accurate, complete, concise and present the reason any investor candidate may invest. This is no small challenge.

ETIQUETTE OF THE PITCH PROCESS

Frequently, I have a full pitch package sent to me by someone I do not know about an investment opportunity I have not requested and about which I know nothing.

When this happens, I have to assume that the person seeking funding knows nothing about raising capital, which automatically downgrades his or her credibility. Yes, since I coach people on raising funding, this may appear to be the perfect consulting opportunity. However, if this person has already set expectations on raising funding and expended time and money in preparation and distribution of the investment package, it would seem that the train has already left the station and the amount of time and energy to try to fix the capital campaign may prove expensive and the person seeking funding may prove unmovable in their thinking.

Before presenting an offering pitch to an investor candidate, an entrepreneur should already know the following:

1.???? The investor candidate’s willingness to receive the pitch,

2.???? The investor candidates’s investment criteria (minimum characteristics)

3.???? The investor candidate’s investment preferences (which investment opportunities are matching with the business and personal interests of the investor candidate)

4.???? The investor candidate’s current capability in making an investment.

Without knowing this information, the entrepreneur making the pitch is being rude. Imagine watching a football game on Sunday afternoon when you hear a knock at the door. When you open it, a person bursts in and sits on the sofa in your favorite position. It would not be a hard guess that you are unhappy, probably upset, and have already dialed 911 to notify the police of an intruder.

Yes, from the perspective of the entrepreneur, this is ‘opportunity knocking’. This myopic attitude that the only person in the world who is important is the entrepreneur is an attitude that few will tolerate.

There is an etiquette to presenting a pitch. It serves to demonstrate the respect for the investor candidate, which is a key to having a quality relationship.

A pitch should never be presented without the permission of the investor candidate. There are a multitude of acceptable ways to gain permission, but starting with a pitch is like jumping into a story when its halfway told.

After gaining permission, the first step in presenting a pitch is to provide the investor candidate with a short (no more than one page) description of the opportunity – a solution accepted by the market that will be managed by the entrepreneur. The deal structure (equity, debt, contract, or gift), the price tag (dollar per share, percentage of revenue, or interest rate), and the term should all be left out of the initial presentation. The entrepreneur is making a quick test of the simple interest level of the investor candidate.

If the opportunity is of interest, then the second presentation takes the form of a survey in which the investor is asked as to their preference in deal structure, terms, or other conditions or limitations upon which they may invest. If the presentation demonstrates that there is no possible match between the business and the investor candidate, then no further contact is needed or appropriate other than to ask the investor candidate if they know of anyone who might match the opportunity.

If there is interest, then the entrepreneur can propose a price for consideration by the investor candidate. This may result in a rejection, a counter-offer, or a request for more information. Anything other than rejection represents the willingness of the investor candidate to negotiate.

Simple deals that only offer the investor candidate an outcome in the form of a return on investment leaves price as the only thing to negotiate. If the entrepreneur offers other incentives, there may be more bargaining room.

Before accepting any deal, the investor candidate will commonly ask for more information. This is the appropriate time for a slide deck, offering memorandum and possibly the investment agreement. I prefer to hold back the investment agreement until requested by the investor candidate which seems to give them a greater sense of control in making a deal.

Keep in mind that every time the entrepreneur offers up information on an investment opportunity the investor candidate may bring in others to advise them and/or help them understand the opportunity. This increases the cost to the investor candidate which they may want to avoid if they have no interest. It also means that other people with other opinions and different agendas must all be sold on the investment opportunity before a deal can be completed.

The pitch process is almost always four or five meaningful and productive interactions between the entrepreneur and the investor candidate. Any story of a shorter process is more likely the makings of a television show script and less about reality.

At this point, I have seen entrepreneurs fidgeting over the slower steps of proper etiquette and wanting to jam the pitch in the face of the investor candidate to get an answer. Any quick answer is almost certainly a ‘no.’

It is also an accepted fable that “There’s no harm in asking.” Disrespecting an investor candidate is harmful. Not only is any possible relationship with that person or funding source busted but there is a high probability that they shared that story with other investor candidates.

SUPERCROWD CHICAGO

WEDNESDAY, I presented at SuperCrowd Chicago with over 20 speakers on the topic of investment crowdfunding, impact investment, community support, capital markets, and small business with past, live, and future investment crowdfunding projects and campaigns.

My presentation was on the topic of ‘Crafting Crowdfunding Offers to Customer’ where I shared my work and thoughts on framing an investment crowdfunding campaign to match with the needs and capability of a customer of a small business.

The event was live-streamed. You can see the entire recording of the event on YouTube at:

https://www.dhirubhai.net/pulse/supercrowdchicago-live-thesupercrowd-8h2yc/

TOP FUNDRAISING VOICE

LinkedIn recognized my work over the last six months in publishing this Instant Funding newsletter, the production of my Successful Funding show live streamed on LinkedIn, and through answering questions on funding topics with the issuance of a badge to me for “Top Fundraising Voice.”

QUOTATION

"The power of accurate observation is commonly called cynicism by those who do not have it."

George Bernard Shaw

SUCCESSFUL FUNDING

TUESDAY, JUNE 11, my guest on the Successful Funding show was Eric Hanson. We discussed Viable Investment Opportunities.

You can see a recording of this show at:

https://www.dhirubhai.net/events/successfulfunding-erichanson-vi7206065144995483648/comments/

Eric A. Hanson

You can see all of my shows at the time of broadcast or recordings of past shows at my profile on LinkedIn.

https://www.dhirubhai.net/in/karldakin/

DON COHEN SHOW

MONDAY, JUNE 10, I was a guest on Don Cohen’s show with Todd Dewett. We discussed leadership which focused on balancing one’s business and personal life.

You can see a recording at:

https://www.dhirubhai.net/events/7204870182769500161/comments/

Donald Cohen

Todd Dewett

I enjoy being a guest, engaging in conversations with other guests, and building communities with Don, using LinkedIn as a communication channel. Every show is its own adventure as we start with a word of the day and then see where the conversation goes from there.

Don is an expert on LinkedIn, particularly on the use of Live streaming to build brands and communities. We will discuss using LinkedIn as a social media platform for building communities that support raising funding.

All shows where I have been a guest can be viewed on Don Cohen's LinkedIn page under Posts.

https://www.dhirubhai.net/in/doncohen/

OPPORTUNITIES

With avian flu in the news and a growing number of cases of diseases and pathogens transmitted by air, I am advocating the use of cold plasma as a safe and effective way to continuously disinfect the air and surfaces within any kind of building.

I can provide Pathogen Focus disinfection equipment and conduct a small-scale clinical demonstration on-site in the field. Anyone interested in learning more and discussing a demonstration, please contact:

Karl Dakin at [email protected]

SUBSCRIBE

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Karl Dakin, the Capital Coach

Dakin Capital LLC

[email protected]