by Kim Lavine
If you don’t know, you have no leverage and if you have no leverage it's 'game over' for entrepreneurs looking to raise capital.
Your “Value Proposition” is a snapshot of your critical opportunity you dangle like a carrot on a stick using what you got to make people do what you want.
How To Frame Your Value Proposition:
In a nutshell, your Value Proposition tells investors what your business model is, how much capital you are raising, what percentage of your company you're giving away in exchange for that capital, and when and how much money can they get in return for their investment of capital.
What is it?
All selling is broken down into these three steps: Introduce yourself, Show them the Money and Ask For the Sale. Telling iinvestors "What is it" they're investing in is the same as Introducing Yourself. Is it a consumer product ready to go into distribution? Or is it a new technology requiring Research & Devleopment capital to get it off the ground?
How Much are You Raising?
Entrepreneurs I work with always ask me the same question: How much money should I ask for? I always give them the same answer: Exactly what you need and not a penny more.
What's Your Financial Forecast?
In order to raise capital from investors you need to provide sophisticated financials detailing how you will spend every dollar they give you to deliver the Exit Strategy you're forecasting. They never want to see more than a $10,000 "cash cushion" sitting in your bank account earning interest when it could be in their's instead.
What Percentage are You Selling?
Investors want to know what percentage of your company you're selling in exchange for the total amount of capital you're raising. The lower the percentage, the more interested they will be--depending on how much of the company ownership is already diluted by existing investor shares.
What is Your Exit Strategy?
Investors aren't giving you money out of the goodness of their heart; they're doing it for high-profit, fast-growth returns. You need to know what your Exit Strategy is right at the beginning and tell investors the first time you speak so they can see "what's in it for them" and when they can expect to see it.
What's your Value Proposition?
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