Every startup and early stage founder believes if only they could attract VC investors, their business / brand would take off like a rocket and become a marketplace smash.
Unlike angel investors, private equity investors don’t invest in founder’s dreams. They only make investments in a proven business that has the capability to scale. And most importantly, will make them lots o’ money over time. Just because you’ve had angels invest in your early growth brand, doesn’t mean your business is ready for private equity investors.
With failure rates for startup and early stage consumer brands exceeding 80%, the competition for investment capital requires early stage founders demonstrate they have a solid strategic and operational foundation in place. VC investors partner with those founders who have successfully done all the difficult work of the early struggle phase bringing new value to the marketplace.
There is a high bar for your brand to be investor ready:
1) Your early stage brand has marketplace acceptance with growing demand…
Your innovation is proven, you have a solid base of early adopter customers/consumers who love your brand and they’re spreading the word. Your channel velocities and sales are on an upward trajectory approaching or exceeding the 7-figure revenue level.
2) You have a solid leadership team in place…
Within your business you have the right people in the right seats all rowing the boat in the same direction toward creating a strong customer-focused culture. Your team has credible and proven knowledge, skill and leadership expertise to take the business to it's next level of growth.
3) You have solid business relationships with supply chain, manufacturing and distribution partners…
This is incredibly important to potential investment partners. A brand ready to scale has an established reliable supply chain, manufacturing capability and steady growth in retail sales channels. These essential relationships signal to investors that you can operate efficiently and profitably to meet the growing demand for your brand.
If you’re brand isn’t quite investor ready, here’s what you need to focus on to get it ready:
1) A compelling idea of value… Behind every great brand is a compelling product idea capturing the customer’s attention, changes their behavior and fulfills their unmet or unsatisfied desires. Savvy investors of early stage CPG brands know the world doesn’t need another me-too skin cream, snack bar, taco sauce, T-Shirt or fizzy water brand. Your innovation needs to represent a highly valued idea embraced by a growing tribe of people and not available from competitors. 2) A resolute core purpose and guiding values… Purpose and values build the foundation of why your brand exists and why it matters that distinguishes your brand from alternatives in your category. Yvon Chouinard, founder of Patagonia says, “We follow our beliefs customers follow us.” When customers follow you, you have "brand power". Influential “one and only” brands represent a set of shared beliefs with their customers/consumers/users. Shared values enhance relevant differentiation of your brand. Potential investors who understand, share your values, and believe in your mission are more likely to bet on your business.
3) A strategic vision that is a central organizing principle … This is the "spiritual software" employed as a management discipline that establishes the mission, organizes the best people, operations and money to serve customers in ways that make your brand their one and only choice. This is the source code for competitive advantage. VC investors need to be confident that there are management processes in place that support your capability to scale the business.
The hallmark of an investor ready consumer brand:
The “idea of value” is a proven innovation in the marketplace attracting an expanding tribe of people who love what the brand offers and pay a premium price to obtain it.
The brand is backed by a skilled leadership team and organizational culture with the capability to efficiently and profitably manage growing demand.
The brand has a clear mission for how the organization will build productive relationships with partners, suppliers, distributors and retail buyers is essential for a bigger future.
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