Management, Perception, Leverage and signing a 20mm investment commitment
How much is one million dollars worth? How much is ten million dollars worth? What is it worth to have someone commit to twenty million dollars?
Value is pure perception. Big data can make company valuations exceed 100 million dollars. The role a person plays in a room requires analysis. Analysis of management, perception and leverage are key sticking points for me.
You can have no management capabilities without credentials. Credentials confirm your ability to have organization. You can have no perception without credibility. Credibility is your track record, certifications, experience and relationships. You can exert zero leverage from disadvantageous positions. Each component plays a role in conflict. Business is conflict. In conflict allies are recruited. In conflict parties that begin as enemies can also become your best friends.
Respect is discovered only through proper presentation. Proper presentation is defined through accurate perception.
THE ROLE OF US VERSUS THEM
Investment groups initially view companies as “them”. Investment group members are the “us”. Seldom will an investment group initially think a company approaching them is part of their team. Anyone part of a team is an “us”. Anyone outside a team is a “them”.
In my experience I learned religion, race, creed, philosophy and morals are components to business. Components are not the entire culture. Components are pieces of the culture. Sharing components makes a strong case for you to become part of the “Us” concept. Sharing all these ideas does not guarantee your acceptance into any “Us” group.
The perception of “Us” versus “Them” is based on mutual benefit. As long as your actions directly correlate to another’s success you will be an “Us”.
The moment your actions correlate to something other than another’s success you are a “them”. Never forget this lesson.
I have discovered the “Us” vs. “Them” concept several times in business. Business is amoral. No one is right or wrong. There is simply what is. The only requirement for valid action is law. Law determines what is permissible and non permissible.
Therefore, the only item to carry relevance is if you are part of “Us” or “Them”.
Management is organization. No party wants someone on their team who is disorganized. Disorganization breeds lack of accountability. It is difficult to measure success when it is difficult to define it.
Not all success is defined by cash flow. Some businesses need growth in assets, market share or through technology innovation.
It is impossible to define milestones without organization. Well versed organizers are invaluable to management. Those demonstrating sound management are valid team members. Team members are part of the “Us” group.
Perception is how another views you. Perception without clarity causes concern. A person’s inability to show clear value aggregates concern. In order to perceive something you must first have sight.
Having sight in business is clearly showing who you are, what you bring to the table, tangible value you have and clear contribution through relationships (that are unavailable to the group you are presenting) to enhance mutual business.
Failure to substantiate yourself at a table is recipe for your seat removal.
Never feel uncomfortable if someone asks you to stand up and explain to the group why you are there. If you cannot summarize your role in three to five sentences than you don’t have a role. Too many words are a sign that someone is grasping water and hoping to catch it. A hand cannot hold water.
You must be realistic with yourself. Clearly articulate why your presence is justified. Do not shy away from validating your presence when people question your presence.
Leverage is exerted when a person recognizes your management skills, perceives your position to be advantageous and concludes your intentions are positive. The conclusion of intentions is drawn from genuine intention. Positive conclusion is basis for respect.
Fake people are fake. Bad energy is bad energy. Dishonesty is dishonesty. Harboring negative emotions exudes negative feeling in the room. You may be able to hide your words but your intentions will negatively affect others.
Have you ever heard of the saying, “What’s your gut feeling”?
Negative emotions create bad gut feelings. Gut feelings are attributed to instinct. A seasoned investment group has strong business instinct. Never become overzealous. Never believe you can fool people with strong business instinct.
You will find yourself unable to close deals, gain traction or fulfill promises to others.
When you have leverage you can negotiate participation. Never falsely exert leverage. Having no position and pretending you have position is a fool’s position. In all stages of business there are advantages. Even a start up with zero capital has an advantage to some people. The key to exerting leverage is identifying proper investment group audience. Your audience should honestly perceive your position as advantageous.
Don’t pretend your position is great. Your position is great to some people. To others your position may be very unfavorable.
Understanding the difference in audience is important to closing investment.
20MM INVESTMENT COMMITMENT THROUGH PROPER APPLICATION
In order to obtain strong institutional commitment (from a very big firm) it was important I manage all items of presentation. Management was given through strong structure, sound legal, accounting competence (by ensuring we had a CPA) and finally easy to understand exits.
Most people fail to understand what an exit strategy is. Saying you will sell a piece of real estate if the rental market is not good is not an exit strategy. That is an adjustment in business strategy.
Exit strategies are external third party variables that de-risk investment. Exits often have nothing to do with core business operations.
For example, an exit strategy I frequently deploy is getting solvent private funds to agree to repurchase stock at a higher price than initial investors pay for their stock. Investors feel comfortable with investment because they have an exit. A third party willing to purchase stock back in the future (with a modest return) if the business does not support investor expectations is very attractive.
Perception is strong when a third party is willing to exit early stage investors, organization is evident, and the path forward is clear. Leverage is applied when competency shows careful planning with prudent decision making.
Documenting everything with accountability goes a long way.
As a result of implementing these concepts properly one of my companies signed a commitment letter for 20mm USD. The group was willing to fund the company’s initial “seed” stage. We ensured “positive” conclusion by volunteering steering committee participation, communication chain processes and investment group participation in planning. We not only complimented their legal but asked legal to represent us jointly. We affirmed legal participation to ensure we performed exactly as planned.
Since the investment group was becoming a new shareholder there was no conflict with legal representing us together. Their legal was now our legal. All parties viewed the endeavor as “our” project. Everyone was an “Us”.
Apply these concepts to your approach. Focus on management to define your perception. Once you establish positive perception exercise leverage. The leverage you exert is to maintain mutual levels of respect. Once respect is reached ask for joint collaboration. Seek out your funding partner’s expertise, input and resources. View them as an “us” not a “them”. Through all of these steps ensure genuine disposition. Falsehood is always false. Strong business instinct always detects dishonesty. Gain prospective on the real issue driving institutional funding demands. Follow me on Medium or subscribe to my newsletter to learn more insightful advice.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM), Master Financial Planner (MFP) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com