How much money have you invested in your business?
On the hit TV show Shark Tank, that’s the question every entrepreneur gets asked. The angel investors and venture capitalists want to determine your company’s valuation. Their question says “Show me the money” before I show you my money. The investors are looking to see what it took to start your business. How much have you spent, in time and money, to get where you are before their pitch?
In other words, do you have skin in your business game, and how much?
Show me your mentors before I show you my money
I recently met and talked with Christian investor, Bill Murray, CEO of ChristianAngelInvestors.com about funding companies. In his experience, he too often finds poorly prepared and running business owners looking for funding. They’ve spent nothing or done little to build their business. Some are “pre-revenue,” i.e. startup speak for they’re not making any sales or profits. They’re more wanna-preneurs than entrepreneurs. In fact, he asked the question of one business owner who replied matter-of-factly about using his own money in his business, “I am not going into debt!” To which Murray answered, “So, you want me to invest my money in your business so you can spend it how you see fit?” The business owner failed to listen to what the investors were telling him. He refused to budge from his position to put more of his skin in his business game.
When you are seeking money for startup funding, the same principle applies for wives as much as husbands. The Proverbs 31 woman sold land and bought a vineyard; it takes workers to run her vineyard business. But when individuals starting a business look to their spouses for support, they should stand on their own two feet regarding their business. They should look for investments for their serious business and not for others to “pick up the tab.” Support should not for the thrill or fun of thinking you’re running a business or for those which lack the courage or confidence to make their business profitable. What can it look like?
Cornelius Vanderbilt’s wife, Sophia, “took charge and earned a reputation as a gracious innkeeper who provided good food and small courtesies…all this while caring for yet another [their fourth] baby [eldest boy William Henry]…Indeed, her husband left management of the children entirely to her…[and] even demanded that she feed, clothe, and educate them out of her income from the inn.” If Sophia had no profits, there was nothing for their kids. She had to make it work, not unlike a single, divorced, or widowed mother or dad today. Same goes for a spouse or kids starting a business.
The biggest issue for most people starting a business is getting out of the consumer mindset of, “I have to pay for…,” and into a producer mindset, “I’m investing this with the hope of making…,” more income in the future. Sometimes it requires a few mentors and some time to get one out of the small, consumer thinking and into the bigger, producer thinking.
Prov 15:22 Without consultation, plans are frustrated, But with many counselors they succeed.
It’s less about talking with those that have jobs and more about talking with those that are currently running successful businesses in the industry or area you are looking to pursue.
Ignore initially finding any investors; it’s better instead to find mentors for your business who are a few steps ahead of you. Don’t skip steps or follow the “get-rich-quick” or “Five Figure Income” advice to accelerate your efforts; they rarely are what you need. Instead, ask questions to eliminate or mitigate any potential mistakes, downfalls, or wrong paths you are considering taking.
Below are Murray’s four questions you need to ask yourself about your business. Until you can honestly answer these four questions below truthfully, scrap looking for investors for the moment until you can.
1. Is it God’s will for me to start a business?
First and foremost, this is about God and you, no one else. That includes your spouse, family, or friends. God is the starting point of your business and how and what He has created you to do. Your purpose is your talents and skills; your passion is who you serve. But what I can truthfully tell you is this: Most people, including spouses and kids, can start a business, even a side hustle on the weekends. But to attract legitimate investors with money, you need legitimate business scalability and growth, i.e. sales, profits, and growth potential. This means you need to prove/show how well you handle what you’ve been given by God up to this point. In other words, you need accountability.
Luke 16:10 He who is faithful in a very little thing is faithful also in much; and he who is unrighteous in a very little thing is unrighteous also in much.
If you can’t handle your own money wisely, including investing in your own business, what makes you think someone, or God, will invest in yours with the money God has blessed them with?
Secondly, in my talks with others and asking if they’re doing something they love, most say no, especially in jobs in which they are not fully engaged. That’s the fault of the leadership of their organization. Starting a side hustle is about creating a second or more income stream, making a few hundred dollars or more a month to supplement their first income stream. The idea is to no longer just looking to get by, it’s looking to their future and to get ahead, they’re looking for prosperity for themselves, their family, and their community.
2. Have I prayed seeking God’s leading about this business?
This second question is asked so that you’re seeking God’s leading, not your spouse, children, family, friends, or church leadership. God’s leading starts with how God created you with your specific, innate talents and skills. These are what you were born with and have developed over time. Or, you could have recently discovered new and latent talents which, because life happens, finally became uncovered. Peter Drucker, management consultant, became an author and hit his writing stride in his 50s. Your innate talents are the strongest hint where you should be in business.
3. Have I sought out wise counsel…?
Most often people ignore their initial thoughts and let their God-given ideas die a quick death. The few beginning entrepreneurs who get bit by the entrepreneurial bug take action. They run off into the idea sunrise and take massive action. Nothing wrong with taking action, but follow Benjamin Franklin’s advice; “If passion drives you, let reason hold the reins.” Seek out wise counsel to ensure you keep on the straight and narrow. Don’t get blindsided by the “shiny objects” that may enter your startup business pathway.
- …who is a believer and spiritually mature? We’re not to be “unequally yoked” with unbelievers, especially in business partnerships because of the competing motivations. Believers have a WORD-view while unbelievers have a WORLD-view of business. A friend had great ideas and started coming up with their product marketing and pricing without ever asking why other companies were not pursuing this product or service until I asked them clarifying questions.
- …who is in the industry I’m being led to start a business in? Are you seeking out those individuals who are in the area you want to start your business, like computer programming, healthcare, food, or construction? This is a part of your talents and market research. And just because it hasn’t been done before does not mean it can’t be done, like coming up with the PC/Mac market and creating a whole new market of desktop/laptop/tablet computers.
- …of people who have been successful in that industry? You want to talk more with people who are grounded in the business. It’s less with those businesses that are dead and buried, but learn the lessons of failed businesses. Apple’s iPod is a great example of what companies had done up until that time. It was Apple’s marketing spin of putting “1,000 songs in your pocket” which made the digital walkman such a hit.
4. Finally, is God opening or closing doors to my business?
If you answered the above three questions truthfully, this step is getting to the heart of seeking funding for your business startup.
- Is God saying, “Delay the start?” Delay launching your business until God’s time is right. Joseph was 17 when he had his dream (Gen 37:2), but it did not happen until he was made viceroy at 30 years old (Gen 41:46) and nine years later (second year of the famine, Gen 45:6), his brothers came to buy food (Gen 42-45).
- Is God saying, “Never start?” You see this when people on American Idol think they can sing and are “passionate” about singing, but can’t carry a tune in a wet paper bag. Never start a business in an area if you’re incompetent. Do you have the natural talents or the developed skill set to perform what is needed? Then do that. I suggest you take the test from Strength Finder 2.0. This will narrow down your business from a “never start” to a “delay the start” and put you on the path toward stewarding God’s business for Him.
Whether time or money, you should invest in your own business first. That shows your commitment in what you believe. The below terms and numbers are not in stone. They give a bit of perspective on who and the amounts you may be seeking to fund your business.
- Microfinance: <$10,000, such as Kiva for third world countries or other avenues for companies in the US.
- Crowdfunding: $1,000-$100,000, like Kickstarter and Indiegogo are sites that seek many individuals to fund a startup.
- Angel Investor: $10,000-100,000 for a wealthy individual who invests his or her personal capital in a company in exchange for equity in that company.
- Collective Investors: $500,000-$1,000,000
- Venture Capitalist: $1,000,000+
If God and you answer yes to all of the above questions, you’re on the right path that God wants you on regarding seeking funding for your business.
As a business owner seeking funding, you might be asking the investors to “Show me the money.” In reality, do you want a better prepared business before you’re told after your poor pitch and business, “Show him the door!”?