Guide to Taking Money

http://www.dmconfidential.com/blogs/column/Digital_Thoughts/1352/

Those doing lead generation occupy an enviable space. It's a business that has faired well during the ad recovery, and despite some hiccups that arose as a New Century imploded, more verticals than not have an optimistic outlook. Unlike the ad network technology space, instead of a flurry of acquisition activity, deals have occurred steadily, the most recent being a majority investment into Nextag that valued the comparison shopping and lead generation firm north of one billion dollars. Many of the people that I've met in the lead generation space didn't enter lead generation with a grand vision. They saw it as a chance to make money, and usually they had some prior Internet advertising experience as well as some vertical expertise. Much of that prior work experience came at another cash flow focused startup, not at a venture backed firm. Even as they grow now, they don't necessarily think about having outside investors.

If you find your business in a state of growth where having access to more money could help you grow faster, such as pay for more affiliate traffic, then you might consider taking in funding. If you have a technology or process that has played a crucial role in your growth and find that you could do so much more if you could hire more engineers or perhaps sales people to bring in the clients, here too you might want an outside investor. Obviously, having outside investors is not for everyone. They will hold you accountable and push you for results. They will challenge you and have no problems replacing you. For these same reasons they can also become a huge catalyst to growth and guide you towards an exit bigger than you would have thought. And, even if you ultimately decide not to accept funding, the process can add a lot of value. This week, we thought we'd share with you our thoughts on what to expect if you start to engage outside investors from outside the industry and tips for when you do meet.

What to Expect:

· Think High School - Investors come in all types. The ones who came from our industry or work in our industry still, you probably won't think of them as investors. For lack of a better description, they feel like one of us. Others won't, and those we describe here. While a slight over-generalization, some of the ones we have met give off the same vibe as Hollywood A-Listers or the in-crowd at high school. They have their circle, and they look very critically upon those outside the circle. You are there because you might need something of them. Almost all of them have made their money, so they can afford to view you, not with disdain, but indifference. Dealing with them comes with a lot of rejection and comments that an outsider not having to live the day to day can afford to make. It's a different story when you've created the next Facebook. Then, you're like the college quarterback coming back on winter break. The cheerleaders will want your attention and the other jocks will too. If they don't, then you can chalk it up to jealousy, and you won't care anyway. Dealing with some investors is a "what can you do for me" environment.

· Superman or Vampire - An investor can do a lot of things for you, and most have dual developed dual personalities. On the one hand, they have knowledge and resources you don't. They have the ability to open doors, get favorable terms, and increase the value of your brand in ways that a lone entity simply can't. They also have the same power in reverse. They can suck you dry. Take away your spirit, put pressures on you to change your business, even play a role in removing you from your own business. Ultimately, it's a little of both. They are there to add value and take value from you. The trick is making sure it's in that order.

· "Next" - Meeting with investors feels like a different version of MTV's dating show, Next. You will have your time with them. If you make it through the full date, you get funding. But, they can and will lose interest and sometimes for reasons that won't make sense to you or the viewing audience. Like Next, they have other options waiting, but they are also wondering whether the ones that follow you aren't as good. Luckily, they can choose more than one date, but it's a helpful analogy as you remember that they are always in search of the next thing.


Tips:

· Be Confident - Investors invest. They need you to execute. You have created something that got their attention in the first place. They might have a better grasp of how to build a billion dollar business and can lead mind numbingly complex conversations about solving the business ecosystem, but they don't know your business. Ultimately, they have money they need to place, and as often as not, they judge the business by the person. If they can believe in you, that's a huge factor in their decision. When you talk, if you don't agree with their assumptions, don't roll over. Challenge. Push back. Do it based on reason and experience and not simply because they have some doubt.

· Think Like Them - Management books always talk about being able to think like your boss for being a better employee. Understand their objectives and how you can accomplish them. The same holds true for investors. They want growth, and they want an exit. They want longevity even if they will flip your company. They need something that will sell well to others. An over-priced conference series like Elite Retreat is interesting, but an investor won't want to sink money in it or buy it out. It can grow to a multi-million dollar business and make a handful of people quite wealthy, but in its current format it has a ceiling. It's not like Right Media, where if you apply it to Yahoo, you don't see 1+1 = 2 but 1+1 = 3. Now, if Elite Retreat didn't accept money but took a stake in the companies, then it might be more interesting, or if it tried to see more companies than fewer with the aim of putting pieces together to form a larger company, then it has the type of growth and potential outside investors want to see.

· Listen Selectively - Much of what they say will sound like criticism, and you could easily take it personally. Think of it like a movie or reality show. The dialogue used in movies would break up most relationships if used in real life. But it has dramatic flare. Investors often operate in a bubble and talk about you and your business as though you aren't there. Like a movie, listen for the main points, the insight you can use, but don't let the negative get your down. They often don't know they are doing it. You and your business are just business. There is nothing personal in this. In the end, pretend it's not really you that is being discussed, much like a movie is not about you but for you.


Now fully armed, if you would like an introduction or more information, email us.