How can entrepreneurs dispel investor concerns? How to improve financing success rate?
Editor’s note: This article is from WeChat public account “Entrepreneur” (ID: chuangyejia) .
On March 24th, the special spring day of the Dark Day of the Black Horse Academy’s graduation season was held online. As a roadshow tutor, Jin Yi, VP of venture capital investment and head of war investment, Jin Yi shared pre-match topics such as “key points of financing in the outbreak.”
The following is a selection of their sharing, edited by entrepreneurs & dark horses. Oral | Jin Yi finishing | Li Yan
For financing, most entrepreneurs will have some misunderstandings.
Especially the epidemic situation is heading. With the continued turbulence of domestic and foreign macroeconomics, investors are increasingly worried about risks. In such a capital environment, how entrepreneurs can highlight the advantages of their projects, how to dispel investors’ concerns, and how to improve the financing success rate, they must essentially grasp the following four core points.
01 Same frequency as investors
Good business is not necessarily a good project.
Many entrepreneurs feel that their projects are already large and very profitable. But why are investors still not interested? The reason is actually very simple, because investors do not know whether this project can withdraw in the future.
For general 5 + 2 or 7 + 2 funds, generally there is only 5-7 years of investment time, and whether they can successfully exit with a certain multiple after expiration is the only criterion for LPs to measure investment institutions. Therefore, some entrepreneurs will need to raise 100 million yuan in the first round, with a valuation of 1 billion yuan. If this growth rhythm is followed, the valuation will be at least 10 billion yuan in 5 years. The success rate behind this is enough to persuade most investors. .
So, when entrepreneurs look at their projects from the perspective of investors and exit, they will find what are commonly used packaging terms such as trillions of industries, exclusive blue oceans, vertical ecology, etc. It’s worthless to investors. What they really care about is whether a project can continue to be competitive, whether it can quickly establish a monopoly, and whether it can meet the listing standards within a certain period of time.
If you think about financing again with this logic, if you want to build trust with investors and get the money in their hands, you must tell them a reasonable realization or exit path. So in order to open up this path, entrepreneurs must at least explain the industry scale and development spaceExactly how big it is, whether the business model and competitive advantage are established, and whether the team capabilities match these three core issues.
02 Speak out the industry
Entrepreneurs must learn to analyze their industry with investors in a structured and logical way.
For any industry, concentration and innovation are the key factors to measure the development space of the industry. The degree of concentration determines whether the industry can be highly integrated, and the degree of innovation determines whether there are opportunities for technological transformation in the industry. By establishing a four-quadrant in this way, entrepreneurs can clearly position their industry and their projects:
High concentration + high degree of innovation: In industries such as online travel, mobile phones, and payments, companies have the opportunity to highly integrate the industry through new technologies, so the probability of obtaining investment or being acquired Would be higher;
High concentration + low innovation: In industries such as enterprise software and hotels, although entrepreneurial opportunities and innovation opportunities are relatively small, once they become larger, they will have the opportunity to establish an industry monopoly pattern. Therefore, there are more investment opportunities and valuation fluctuations will be stronger;
Low concentration + high degree of innovation: For industries such as used cars and convenience stores, it is difficult to form a unique structure, so it is more suitable for entrepreneurs to enter, but facing Risk of model innovation is also greater;
Low concentration + low innovation: Industry and leisure industries, such as local life, can not form a larger industry scale, and have a lower correlation with technological development, so The probability of successful investment is also low.
Taking JD as an example, the integrated e-commerce platform is a highly concentrated industry, and whether it can become the top five in the industry is very important. Therefore, JD.com started from the field of computer and 3C, quickly achieved the first place in the vertical field, and then gradually expanded to large and small household appliances, office supplies, shoes and hats department stores, food supermarkets, and now takeaways and so on. This path means burning money all the time and crowding out other competitors.
Entrepreneurs must learn to analyze their industry with investors in a structured and logical way.
For any industry, concentration and innovation are the key factors to measure the development space of the industry. The degree of concentration determines whether the industry can be highly integrated, and the degree of innovation determines whether there are opportunities for technological transformation in the industry. By establishing a four-quadrant in this way, entrepreneurs can clearly position their industry and their projects:
High concentration + high degree of innovation: In industries such as online travel, mobile phones, and payments, companies have the opportunity to highly integrate the industry through new technologies, so the probability of obtaining investment or being acquired Would be higher;
High concentration + low innovation: In industries such as enterprise software and hotels, although entrepreneurial opportunities and innovation opportunities are relatively small, once they become larger, they will have the opportunity to establish an industry monopoly pattern. Therefore, there are more investment opportunities and valuation fluctuations will be stronger;
Low concentration + high degree of innovation: For industries such as used cars and convenience stores, it is difficult to form a unique structure, so it is more suitable for entrepreneurs to enter, but facing Risk of model innovation is also greater;
Low concentration + low innovation: Industry and leisure industries, such as local life, can not form a larger industry scale, and have a lower correlation with technological development, so The probability of successful investment is also low.
Taking JD as an example, the integrated e-commerce platform is a highly concentrated industry, and whether it can become the top five in the industry is very important. Therefore, JD.com started from the field of computer and 3C, quickly achieved the first place in the vertical field, and then gradually expanded to large and small household appliances, office supplies, shoes and hats department stores, food supermarkets, and now takeaways and so on. This path means burning money all the time and crowding out other competitors.