Phased Investment Needed to Grow Businesses

With top Google rankings for so many technology, green, solar, biomass and renewable terms in business planning and development, I have literally spoken with over a hundred inventors and patent holders that have discovered a solution to the world’s energy malaise. As a positive person by nature and a Christian that believes is solutions, I expect there are many collective solutions that will lead us away from carbon based economy and eventually distance us from oil and even natural gas. We have completed many renewable energy and new technology business plans.

The overwhelming majority of inventors have unreasonable (from an investor’s standpoint) expectations. Often, that means they have a patent on a concept without a prototype tested by major third party engineering firms yet they are looking or expecting funding for a utility grade and scope power plant. Inappropriate expectations of running before walking to a big picture and a related over the top capital raise expectation is typical of the majority of entrepreneurs and business owners in all types of businesses, just magnified with inventors and tech gurus.

Some examples of clients and phased paths to success include:

> We consulted with a client that has raised well over ten million in three phases of prototype development of a renewable energy client over many years and is now a year away after fourth raise to get to very large utility grade capital raise. This the approach expected in new technology. 

> We worked with another Company almost three years ago that utilized many patents to magnify power production with a fairly unique source. I saw the working prototype the inventor developed even though did not fully understand it. Importantly, an investor looked at it invested an initial 2M engineering analysis of substance to get to manufacturing ready prototypes. Two years later, there are still refining the prototypes to get to the market.

>Four plus years ago, we did a business plan and supported a capital raise for a truly break through small to mid-sized wind turbine. The Pentagon at high levels supported the ability to literally fold up a small prototype into a backpack. They got many grants including federal and university endorsed wind tunnel testing, and a couple tiers of investments of substance with angels. We again advised that would not be in position to fund a manufacturing plant despite these raises in the near future and that investors would prefer much further development of the prototype and sales of turbines should be from a third party manufacturer. They have not yet hit the market.

> We worked with a company that on their fourth capital raise (and a fifth during operations) proved in a large scale plant (many thousands of tons) that there is biomass energy source that can be profitable. After that, they partnered is major directions including a one of top ten world economies on partnerships of what may now be a 6th tier capital raises.

Sometimes technology can get to the "big picture" in a two to three raises. That said, there is no single energy answer, just many major answers and we always hope and pray yours or others we work with are one of those major answers. But what about a different kind of company, say one selling a single product with some competition with 200K in revenues? They have a great marketing plan and need operating capital and inventory to expand their marketing from just online to retail stores and expand their product offerings. They have a multimillion dollar annual revenue upside. Should they seek 1M in equity or a $350K SBA loan? They sought the latter and today this client offers hundreds of products into many markets and as they increased sales, they were turning down interest from capital sources.

Phased investment of the approach to attracting capital is unique to each venture. Flexibility in the approach helps, but a phased approach demonstrates to banks, angels and VC alike that you are prudent in your business.

The Psychology of Success in Business

Success first and foremost starts with the senior management, principals and visionaries that start or grow business ventures. Our clients typically range from startups to established small to mid-sized businesses. Hence, when assesses the psychology of success, I am speaking about the CEO or the lead principal in a business, the ultimate leader of that enterprise. The leader sets the tone and indirectly and/or directly in his or actions…or inactions. The leader should have confidence, but not an ego in excess that prevents him/her from accepting solid advice or in building effective teams.

There are varied classifications of behavior, including Type A to Type B personalities. From trustworthy (OK most of the time) Wikipedia, "The theory describes a Type A individual as ambitious, rigidly organized, highly status conscious, can be sensitive, care for other people, are truthful, impatient, always try to help others, take on more than they can handle, want other people to get to the point, proactive, and obsessed with time management. People with Type A personalities are often high-achieving "workaholics" who multi-task, push themselves with deadlines, and hate both delays and ambivalence." There is no doubt that describes me in ALL respects, but being rigidly organized, truthful, impatient and being obsessed with time management really stand out. 

Again, from Wikiperdia, “People with Type B personality by definition generally live at a lower stress level and typically work steadily, enjoying achievement but not becoming stressed when they are not achieved. When faced with competition, they do not mind losing and either enjoy the game or back down. They may be creative and enjoy exploring ideas and concepts. They are often reflective, thinking about the outer and inner worlds." Clearly, Type A personalities are positioned to success more in that nature, but Type B personalities success as well.

I recently had extensive conversation with a prospective client, five times more than the norm for prospective as I approached by so many and have become adept at identifying negative or flawed behavior when it comes to the potential for business success. I have limited tolerance for a negative based thought process that is far more typical in a Type B personality. He had repeatedly emailed me and also expressed the same concerns in two calls focused on the growing competition in solar sales versus focusing on his strengths and the opportunity in a burgeoning market. Of course, that does not mean you ignore the competition but means you become informed on as much of the competition's varied sales efforts and offerings as much as possible, and aggressively pursue a well thought about marketing plan. Successful people seek ways to overcome a challenge and get things done, while those that fret about the challenges over and over are rarely successful. The glass needs to be way more than half full to succeed a consistent basis.

There are perhaps hundreds of books on positive thinking, with the Power of Positive Thinking written by Dr. Norman Vincent Peale one I read in my youth. I have written often on the positive thought process, including an analytic 20 question tool for Psychiatrists to Counselors that measured positive versus negative behavior. A 50 is an average score, with the ultimate Pollyanna a 100 and the ultimate in a depressed individual that has a literal gun to his head a 0. Me, I am a healthy 70 as to attitude. I am not suggesting being totally and always positive when a pragmatic and realistic approach to all is best, but I do suggesting that we will all be much happier is we are predominately positive...and more successful.

We get so many business plans completed by do-it-yourselfers or so called professionals, and so few have a Risk Factors or Risks and Challenges section in business plans we complete. One risk is always the extent of competition but there many others. It is later in the plan and a small section because it is not the focus, just added words of caution that investors expect. It is part of the open book reality that may be negative in other parts of the plan, but the plan is overly optimist, providing there are legitimate reasons to be positive. That is supported to reflect the behavior and beliefs of principals, but if they are not inherently positive and realistic in the balance of the opportunities and the risks, their success will be in great question.

Show Me Approach to Business

After 30+ years of being self-employed including building businesses with 150-300 employees to a consulting practice that has helped many hundreds of clients build their businesses, I continue to have to remind many entrepreneurs and seasoned business owners that transparencies and due diligence are the keys to success. A simple saying should suffice to approach raising capital or establishing strategic partnerships, namely “show me versus tell me.”

Phone calls, particularly when scheduled, are extremely valuable as is time itself. When there is a variety of opportunities to help clients in business plan development or capital access, in our senior living practice and roles in renewable energy ventures, the value of time is magnified. Scheduled calls are part of that and written transparency in emails and documents is both logical and best business practice.

When someone is lacking in transparency in seeking our help, we just cannot help. When someone seeks capital or partners without transparency in their business plan, they will not be successful.

It is critical to surround yourself with staff and strategic partners, such as those that might be working with you even on a contingency basis, that truly understand a "show me, not tell me" approach to business development. This means transparency equals black and white verification in documents such as resumes, references on closed transactions and confirmed access to sales contracts as just a couple examples. Again, a show me approach is a black and white written approach with verifiable statements or attachments, typically emailed in today’s world. The tell me or verbal approach has little value other than to get initial interest, not close a transaction such as a capital raise.

When faced with a choice of business opportunities or considering a plan to raise capital, always rely on and remember that a show me approach gets results dramatically more often than a tell me approach. Given the opportunity to surround yourself with only those that understand the value and appropriate definition of transparency, why would you try to grow a business with key partners that keep telling you versus showing you?