Three Fairy Tales and an Action Thriller | Peter Mehit
The hero bursts through the window, firing two 9mm pistols. Even as the casings and glass are hitting the ground, the bullets find their mark, felling dark robed assassins. She crosses a large empty warehouse, dodging knives, grenades, bullets and well choreographed MMA moves to make it to the closet where a nuclear warhead is ticking…ticking down to zero. Wiping the sweat from her brow, she contemplates, “Red wire, blue wire…,” while pausing to shoot yet another bad guy. Finally, it all comes down to fate as she snips through a random wire, stopping the countdown clock at 00:00.
A protagonist fighting long odds, expending all resources and digging deep into the abyss within themselves to continue to battle back. Eventually, their tenacity and inventiveness is rewarded with success. Many entrepreneurs are affected by this kind of thinking. Not unlike Disney movies for girls years ago (be pretty, smart and attractive and a man will complete you), our movies and books often paint a world that is entertaining, but unreal. For more on this, watch the outtakes from any Jackie Chan movie.
A heroic mindset is useful for times of conflict and challenge, but where it comes to the finances of your start up or expanding company, you can’t afford to be anything but a steely eyed realist. Here are three of the fables we’ve heard in the last decade:
1. “If I have passion it will carry the day and someone will write a check.”This is correct to the degree that if you can’t excite other people about your idea, you are likely going nowhere. But it’s also true that you can be as passionate as a stadium full of Lady Gaga fans and if you are reckless and show bad business judgment, things will not likely go well for you. Passion plus a good idea plus the ability to listen plus being able to be open about your strengths and weaknesses will get you farther. Note all the pluses in that last sentence.
Wildcard: Charisma. If you already have the kind of charisma that has a string of underwear or blank checks trailing you, you are not reading this article.
2. “Maxing out my credit cards and spending my 401k shows commitment.” Yep. It also shows you don’t know how to raise money or access resources. To be fair, your ability to do those things is proportional to the attractiveness of your idea, so if you have problems here, maybe your business concept is suspect. Investors may overlook this mistake if you have a great idea and are coachable. Banks will not give you the time of day (actually, they’ll charge you for it). The bottom line is you will be the steward of a bank or investor’s money. If you can’t manage your own…you get the picture.
Wildcard: Charisma. Good news! You don’t have to be beautiful to have it. Bernie Madoff threw an image of competence and authority that raised billions of dollars. But again, if you can do this, you’re not reading this article.
3. “I know I have a really great idea, just look at all the features it has.” I was around for the .com boom. It was like being a little high on hallucinogens on a daily basis. People would pitch ideas with sock puppets and electronic shopping carts –gasp- and folks who’d made their money investing in steel and oil wrote checks as if they were funding their own heart transplants. Now times are different. Funders are asking: “What pain are you solving? Why would someone buy this?’ If you don’t have a solid answer about who your customer is, you need to regroup.
Wildcard: Social Media. Just mention the word and you hypnotize some people. Make sure you fit the words ‘monetize’ into the same paragraph, but never in the same sentence, whenever you discuss it. Nearly every internet idea we’ve seen in the last three years has a social networking component to it. It’s getting done to death. Sometimes people just want to buy something, or get some information without joining a community. But it’s still working for now, just like charisma.
It has been our experience that you have to be a reasonable money manager to secure investment, especially past the angel or seed money rounds, and always for a bank. For an investor think great idea, hungry customer and high return; for a bank think boring and predictable monthly payments being made on time. This is the starting framework when thinking of pitching a business idea to raise other people’s money.
Our hero appears at a cocktail party in a shear, skimpy dress, the wounds from grazing bullets and knife attacks magically gone. She orders a drink, secures the attentions of the most attractive man in the room and then leaves with him in a Ferrari. The bartender looks at one of his patrons and asks, “Wasn’t that your car she just left in?”
The man slowly takes a sip from his drink, looking blankly into space. “That woman has charisma.”
written by: Peter Mehit