Did you connect with Doug Mellinger, Managing Director of Clarion Capital Partners, during his Founders Focus session on optimizing your business for investment?

Doug joined Scott Case for Founders Focus to discuss a capital partner’s view on investing in a time of crisis.

Check out a play-by-play of top takeaways here…

When looking to invest in companies post-pandemic, investors want to know answers to these questions:

  • Do companies understand the reality of what has happened and the situation they are in?
  • Is leadership making sure the company has the cash to survive? Some people are not understanding the severity and the coming downward slope. 
  • Do companies have plans to get through? 
  • Are the plans realistic?
  • Have they taken actions to cut down to the bone?

No one knows how long this will actually last and you need to protect your company.

Entrepreneurs will need to look at raising less. The formulas in people’s heads for raising capital need to go out the door as founders will be giving up more ownership for less. It’s time to get as creative at financing as possible.

Doug described funding options for companies, such as:

  • Capital available through the government since every agency has funds to help people from a disaster standpoint as well as through contracts. There are a number of resources to explore through coronavirus.gov, SBA, FEMA, and other different agencies.
  • Hospitals and insurance companies have investment funds that they could invest in a company
  • Customers are a potential source of capital – corporate customers prepaying for goods or services – “non-dilutive capital”
  • Traditional VC and family office for capital

The general investment process hasn’t changed, but the environment has transformed. As a result, investment firms have become more efficient as they navigate in this time of crisis. For example, investors have more time because they aren’t traveling and are using Zoom to conduct meetings.

Adapting Amidst Chaos

It’s amazing to see executive teams doing what is necessary to succeed. We need to survive and then we need to succeed.

Most companies were not set up to operate remotely. Businesses have rapidly changed to enable work outside the office. Many companies have found success in the necessary transition to working remotely, and have decided they don’t need office space and can hire employees in any location.

Companies need to spend time asking the question what is possible. Companies should look at what other companies in their sector are doing and who is adjacent to you or in front of you and should be considered if you’re going to be an ongoing business. Founders need to move from asking, “How do I survive disaster?” to “How do I take advantage of the positives?”

Scott explained it’s very hard to cut your way to victory. You can cut to give yourself runway but then you need to look at your core business. Evaluate to understand what your assets and capabilities are so you can figure out how you can use those. Our most creative times are when we’re challenged.

Tips for entrepreneurs:

  • Seek advice from people outside of your industry. They may see opportunities you don’t because you’re stuck in the weeds.
  • Read as much as you can.
  • Network with as many people as possible, talking openly about what you are doing and where you are going. This goes both directions. Reaching out, connecting, and being vulnerable with others is so beneficial.

Which is most important to start a business—money, time or customers? If you have a customer, you can build a business around them.

People are available now. Reach out. It’s easier than ever to connect with others.

Gritty entrepreneurs with a can-do attitude are the winners who will come out much stronger than when they went into the pandemic. Whereas losers are resigned to the fact they will be losers. They are so depressed and down and can’t get out of their own way.

Looking at the future, it’s fair to expect that:

  • there’ll be a dramatic increase in products and services delivered to home and a much greater virtual work environment 
  • more people will be getting rid of real estate and office space
  • telehealth, virtual education, virtual gatherings and conferences will increase
  • live-action related industries are in big trouble as it will be a tough go for a while for industries that bring people together.

Founders must actively and honestly communicate. Constantly keep people in touch with what you are going through and being as transparent as possible about the good, bad, and ugly.

Learn more about Founders Focus and sign up to join the conversation.

PS: Head back to our Upside Blog or watch the Founders Focus YouTube Playlist to catch up on other sessions.

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