Sherry Coutu gave a good speech at the Cambridge Enterprise Conference, CEC9. She talked about using equity to build businesses and stressed the importance of thinking through the consequences of taking on an investor. She illustrated her talk with a series of questions to the audience. What was amazing was the number of people who chose what Sherry considered to be the “wrong option”. Nothing amazes me as I have studied so many businesses and people make the most extraordinary choices which have dire consequences further down the line. Sherry commented that one entrepreneur she knew had taken in a trade investor who had very strong preferential rights at each round and was restricting the options and growth of the company. It took a lot of energy and a few years to exit the investor.
Sherry looked at the six aspiring entrepreneurs in the front row, including Walter Herriott, and I am not sure if even they were making the right options or even really understood the consequences. If you have not been there, you don’t know as they say. The trouble with being an entrepreneur is there is no test and so many people do not have the right basic instinct. Luckily for me it is a simple test to say that I should not bother training as an opera singer let alone a karaoki singer.
I picked out the following phrases from Sherry Coutu’s talk:
– the wrong investors can limit your success or even lead to failure
– take care in choosing your investor as you have to work together for a few years
– will the investors take you where you want to go?
– start by looking at www.thefunded.com
– angels are increasingly important
– investors may look the same but can be quite different
– have the investors done it before; do they have lots of industry contacts?
– make sure you are not hit by other people’s limits (ie does the investor have enough money for a number of rounds?)
I am sure we can incorporate some of these ideas in Equity Fingerprint for each business plan.
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