Fund Raising? Pipeline or Pipe Dream?

After my last blog entry - When Is A Salesperson Not A Sales Person - I now share some further thoughts. At Finceler8, a Sales Accelerator, we are approached by companies to help raise funds for their future growth and success. We have to be careful here because introducing to our investor network, whilst potentially fruitful, can also carry a risk to our reputation. Therefore, we have to be selective and ensure the company raising funds is aware of what investors are seeking and that they have achieved or are capable of achieving certain criteria. But what are investors looking to achieve? To put it simply, think of when we buy shares on the stock market. If I buy shares I believe they are cheaper now than they will be at a point of time in the future when I sell them. I do my due diligence, I do some research, or read research from others and make what I consider, rightly or wrongly, to be a good decision. Personally, I look at, amongst other things, current revenues, company strategy, new products, potential market size, time to market of products plus of course margins – potential to pay increasing dividends. One key indicator is what is the sales pipeline? The share price moves over time, hopefully, but not always (and in my case, rarely) in an upward direction and then at that future point in time I sell the shares and (occasionally) make a profit. So when a company decides to raise funds, over and above a company's product and potential, what do investors look at?

  • Firstly, does the company have any revenues? – hopefully yes, but if not it is not a disaster.

  • Secondly, and this is the point, does the company have a quality sales strategy and pipeline?

But why? Well it should be obvious – If a company can demonstrate that they have been committed and organised in building a real pipeline it shows that they appreciate what the investor is trying to achieve. The company need to have a committed sales methodology – demonstrate that they have approached, met and are in a progressing sales cycle with a number of potential clients. The company must be able to show that they are growing their list of prospective clients and are involved in real negotiations, installing pilots with an agreed end date and can forecast accurate sales revenues over a future period. The investor is then able to calculate that the shares they are being offered now are cheaper than when this pipeline becomes real revenue generating sales. To me this seems obvious, but clearly it is not. Whilst some companies we engage with show the attributes an investor looks for, we also come across companies, some with great product, but with no pipeline and no way of demonstrating that they are in the process of building one. They have no sales resources, either internally or outsourced, and show no planning on how they may engage with potential customers. For them fundraising really is a pipe dream. Interestingly, some companies realise they have a problem. They realise that they need to demonstrate, if not revenues, a strong and valid pipeline but also recognise that they do not have the internal capabilities to do build one. Outsourced Sales Accelerators, like Finceler8, can help here. It makes sense for both parties to engage for a period of time whereby we build a proper strategy and a strong pipeline before introducing the company to our investor network. Indeed, in the business plan we can even be represented as the Sales Director and Sales team. This achieves a strong sales pipeline without consuming too many resources, enabling the company to continue its development and attract further investment. So this is the point – Looking to raise money? Build a Pipeline or it is simply a Pipe Dream.

#fundraising #VC #investment #sales #revenue

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