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Episode from the podcastEntrepreneurs for a Change Podcast: Featuring Social Entrepreneurs, Green Entrepreneurs & Conscious Lifestyle Entrepreneurs

[E4C40] The Keys to Finding & Attracting Your Ideal Investors – Launch! – Scott Duffy

Released Tuesday, 1st July 2014
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I have to recommend a book that every aspiring and early stage entrepreneur needs to read, and that’s Launch!: The Critical 90 Days from Idea to Market, by Scott Duffy, our guest on the show.
Scott is an entrepreneur, consultant, angel investor, Founder & CEO of The Launch Projectimage, a company dedicated to helping millions of entrepreneurs launch new businesses, products, and services, while remaining competitive in today’s entrepreneur-based economy.
Scott began his career working for best-selling author, life-coach, and motivational speaker, Tony Robbins; worked for several early-stage small businesses which went on to become household names such as CBS Sportsline, NBC Internet, and FoxSports.com; and founded the private aviation online booking tool, Smart Charter, which was later acquired by the Virgin Group. In addition, Scott has spoken at the NYSE, and provided commentary for numerous media outlets including CNBC, FOX News, & CBS Radio.
Scott’s on a mission to help one million plus entrepreneurs in the US launch and grow their businesses and make their big idea a reality. We also discuss the best ways to raise capital, the excuses people make which bar their way to success, and Richard Branson’s plans to buy the Amazon rainforest!
In this week’s motivating podcast, you will learn about:
  • Scott’s journey to entrepreneurial success, and the one really important lesson he learned along the way
  • The defining traits of high-impact entrepreneurs, and what separates the successful ones from those who continually struggle
  • How to play it big without burning out, and how to get over that point when you reach the end of your tether, and feel like throwing it all in
  • How to discover what your unique core competencies and skills are, and what you should do with that knowledge
  • The one simple thing you can do to turn a six-figure business into a million-dollars-plus
  • The keys to finding and attracting your soulmate investor
  • What the biggest mistakes are that people make when seeking investment capital, and how to avoid them

Mentioned in this interview

August Capital
Tony Robbins
Iron Man challenge

Where to Find Scott

Scott Duffy’s Launch! on Facebook
Scott on Google+


Lorna: So Scott, I’m so glad to have you with me on the show. Reading your book, “Launch,” gave me such nostalgia for the Bay Area because I used to schmooze in the tech-startup cocktail circuit and I went to parties at August Capital and many other places and it was so much fun.
Scott: Oh that’s fantastic.
Lorna: Yeah I know, I love the Bay Area, it’s a very special place. And I’ve also spent a lot of time in the Amazon Rainforest, so I found it really exciting to hear about Richard Branson’s interest in preserving the rainforest. And finally, I am a huge fan of Tony Robbins, so there’s so much goodness in one book. Thank you so much for putting this work out there. Now, I’d love to have you introduce yourself to the audience and tell us who you are and how you got started doing what you do.
Scott: Sure. Well first of all, thank you for having me on the show today. I’m such a big fan and I’m so grateful to be here. Again, my name is Scott Duffy, I am a bestselling author, speaker, and entrepreneur. I started my career working for a bestselling author and speaker, Tony Robbins, and was fortunate enough to go in and work in the early, very early stage for several small businesses that became big brands, like CBS Sportsline, NBC Internet, and FoxSports.com. I sold my last business, Smart Charter in Richard Branson’s Virgin group, and had the opportunity to run that for Virgin for a couple of years. And most recently I’ve published my new book “Launch” with Penguin Portfolio and my mission is this: my mission is to help over one million entrepreneurs here in the United States to launch and grow their businesses and really take their big idea and make it a reality.
Lorna: So let me ask you, I think I know the answer to this question but, I just want to know it from your own words. Do you love what you do?
Scott: I absolutely love what I do. I can’t say that I’ve always loved what I’ve done and I can’t say, you know, it doesn’t necessarily feel every day like I’m in love with my work because all of us as entrepreneurs and business owners, we have great days and sometimes we have rough days. But I would say that overall, I am living in my dream. I am doing what I want, the way I want, with the type of people that I want to be working with and it’s really a blast.
Lorna: That’s so inspiring. Now let me ask you, what is your secret? How can you advise or inspire other entrepreneurs who really want to be where you are to discover what it is that they love to do, what you’re good at doing, and to create a business for themselves that allows them to do what they love? Did you follow a formula or are there any tips you recommend that we go through or follow?
Scott: Well there’s a lot of awesome questions there, so let me try to break it down. The first thing I think has to do with inspiration and finding the one thing it is that you love. It may be coaching your little kid’s baseball team. It may be launching and growing a business that has a certain impact on the community or the world. It may be just doing something that you find to be so fun every single day. And I think it’s important for us to listen to our gut and listen to that thing inside that’s urging us to do that one specific thing. It doesn’t always mean that you need to start a business, and it doesn’t always mean that you have to do it alone. The odds are there are so many other people out there that are just like you – they have a common passion and share a common vision. What may make the most sense is to find that thing that you love and find other people that want to play with you and go out there and do it or build it together.
As it relates to starting a business, I have so many people that come up to me and say, “I want to own a business, I just don’t know what it is I should do. I don’t know what I’m good at.”
I started asking people to do an exercise which seems to be pretty helpful, and the exercise is this: go to the five people that you spend the most time with and ask those people, if they were to refer you to somebody else to do something – so let’s say somebody came to me and said, “I need the very best person at this specific task,” what’s the task or the thing that I would refer people to you for? A lot of the time we take for granted what we know and what we’re good at. What’s common sense to us isn’t common sense to other people. And so, by recognizing how other people view us and what other people see is our unique core competency or skill, can help us at times to put a finger on where we should start, or help give us some insight into what business might be the best fit for us as individuals. It’s just a little exercise I recommend.
Lorna: Did you go through a formalized process of finding your purpose, mission, vision, and core values?
Scott: I’ve done that several times in my life and I’ve found that every time I’ve sat in a seminar and tried to come up with what my purpose in life was, I had to think too much about it. And I think that’s what’s really cool is when you really figure out what your purpose is or what your passion is. It’s not something you have to sit in a three-day seminar and think about, it’s something that you just know intuitively. A lot of the time I think that we are afraid to open ourselves up, maybe because fear is shutting us down. Let that thing that’s in our gut, that thing that we know intuitively, let that come out and acknowledge it. So what I would say is yes, I’ve sat through several courses where I have been asked to think through about my purposes in life, but what I found the most grounding to my purpose in life is when I just listen to my gut. And I also tend to think that at times people tend to get too caught up in trying to define what the single purpose is for their whole life, and I believe that as individuals, as we grow and we get older and we learn more and we have different experiences, our purpose changes for many of us. And so the idea of finding one purpose and putting that much pressure on ourselves is pretty doggone tough. Instead, I find it easier to take this elephant that we call Life, one bite at a time and determine where I am at this moment of my life and how can I be happy and contribute the most today.
Lorna: I would completely agree with you because it’s such a burden on yourself, a singular purpose that you might have devised maybe when you were twenty, and now that you’re thirty or forty, or just a wholly different phase of life, of course that’s going to change because you grow and you evolve and you become a different person. So I personally think that it’s a good practice to reassess what’s important to you on an ongoing basis. It could be daily, it could be quarterly, or not even that scheduled, just check in and feel whether or not what you are doing feels exactly like what you need to be doing right now, and that’s intuitive.
Scott: It is. I believe it’s so much pressure to put on ourselves. When I was writing my book, “Launch,” I had a very clear purpose when I got started with the book and the purpose was I wanted to share my experience with other entrepreneurs because I wanted to help them learn from that experience and hopefully be able to take their big idea to market and live their dream and it was all about the entrepreneur. I remember I hit a real tough patch when writing the book. You know, writing a book is like building a business – it’s tough work. I was about halfway through it and I’ll never forget, I came into the office one day and I was really close to just letting the project go. I was so frustrated. What I learned is, as I started to write and the book started to come out, the way it became structured was a series of stories about my life but had the lesson that I wanted to teach about that business embedded in the story. On that hardest day when I thought I was going to let it go, I remember sitting at my desk and being quiet and I just turned everything off and I just sat here and meditated and tried to just let things be. And what came to me was, this is kind of a bio, it kind of tells little bits and pieces about your life and wouldn’t it be cool if your daughters one day could get a chance to read it and see more about who their dad was. And so, my purpose for writing the book changed, and that’s really what inspired me. Starting that afternoon, I couldn’t wait to keep going. And I think it’s the same thing in our lives in terms of finding the big picture and big purpose. As we grow and change and life happens, it changes and it’s okay to acknowledge that.
Lorna: Wow, writing a book is definitely a huge endeavor. It’s almost like giving birth in a certain way. How long did it take you to write “Launch”?
Scott: Well from beginning to end, from the time I came up with the general idea for what I wanted the book to look like and who I wanted it to serve, to going out and being signed by an agency and publisher and writing the book, it was about an eighteen month to two year process. So it really was a lot of work.
Lorna: Wow. I really do like the structure that you have that’s interspersed with stories and lessons. It really brings to light the wisdom and the value that you’re sharing. So I’d love to ask you because I’m so intrigued by your entrepreneur stories; in your years of working with and being in the presence of high impact entrepreneurs like Richard Branson, what have you found to be the defining traits that separate those entrepreneurs who achieve massive success and those who continue to struggle? And believe me, there’s so many that struggle it breaks my heart. Because a lot of the people that start businesses, they do it because they believe that they have value and they really want to serve. So what can we learn from these high impact entrepreneurs?
Scott: Well, two things. The first is this: they’re just like you and me exactly. Most of them when they got started, started at the same place that we start at, with nothing but an idea. And they don’t have, despite what some may think, they don’t have all the capital they need and they don’t have all the people they need and all the resources they need. They don’t wait to accumulate those things in order to say go. Instead what these people do is they accumulate the resources they need every single step of the way. And so to me, one of the things that gave me comfort as an entrepreneur was that the difference between Richard Branson and Tony Robbins – I’m looking at my bookshelf right now, and all these people whose books I’ve read – and me is nothing. Nothing other than the fact that there may have been more times that they said yes, and they just decided to go and to pursue whatever their passion was. And that’s the first thing. The second thing I’ve learned is the people that have been the most successful have taken the most shots, and they failed along the way.
So if you as an entrepreneur, maybe you have started a business or maybe you have tried to get it off the ground and it didn’t work, I’ve got to tell you, you are in awesome company. Because the most successful people out there, that’s what they do. But here’s the thing that they may do a little bit better than everybody else, is they really take a look at the experience and what it is they can learn from it, and then they move on.
I always say that the most common trait between the most successful people on the planet is this: they have terrible memories. They are able to forget the stuff that didn’t work and they move on. The other thing that they have is they tend to have this incredible sense of possibility, what’s truly possible.
You mentioned the rainforest earlier and I’d love to share this story, a couple years ago I had the opportunity to go to Richard Branson’s home on Necro Island for a Virgin CEO retreat, and he had just purchased the island next door called Mosquito Island, because I guess if you’re going to own one island, you might as well own the one next door, right? So that first night, what we did was all of us got together in these small little boats and we went out to that new island that Richard had purchased and the cool thing is we were in the middle of nowhere and it was just pitch black outside and this island was completely deserted – there’s nothing on it. And we go around this corner, and there’s this small, tiny little strip, the only strip of beach on the island, and Richard and his team had set up barbecues and tiki torches, and we got out and had this amazing dinner. And I remember, I grabbed my food from the buffet and saw Richard sitting over here and I came over and sat next to him and there’s a group of Virgin leaders sitting in a circle, and I remember asking him, what is it that he was trying to negotiate? Because he was trying to negotiate something at the time, and I said, “What are you trying to buy?” And he said, “The rainforest.” And I said, “The what?” And he said, “The rainforest!” And I said, “Which rainforest?” And he said, “The Amazon.”
Lorna: The world’s largest rainforest!
Scott: Yeah you know, if you’re going to buy a rainforest you might as well buy the biggest one. So I said what I figured what most people were probably thinking which was this: “That’s impossible.” And he got this look in his eyes like, how could you ever get in the way of possibility? How can it not be possible? And he said, “If you want to learn how to buy a rainforest, I’m going to teach you how.” And basically he started asking a great set of questions. He asked things like, “If you wanted to buy a rainforest, how would you do it? Would you have to buy it or could you lease it?” And for me that was a huge shift in thinking. And the second question was, “If we were able to negotiate a rate –“ And by the way, who do you even buy a rainforest from? I still don’t…
Lorna: Yeah! The government, the indigenous people who are usually not consulted around the sale of the ancestral territories? Exactly, who do you ask?
Scott: Exactly. But let’s say that you could negotiate a price, he said, “Who do we know that would be willing to give to this cause?” and he knew a group of people around this, started a list group of entrepreneurs and he said “Well, wouldn’t it be cool if we could crowdsource this, and get other people to invest in this venture?”
So what was amazing about this experience is in less than five minutes, buying the rainforest felt easier than eating my bowl of soup. And I think that that’s the difference between the most successful entrepreneurs and others is this; this unlimited sense of possibility, this idea that if you have a goal and you back out of that goal into small, manageable bite-size steps that feel easily achievable, you can achieve virtually anything that you dream.
Lorna: So Scott, when I talk to my audience of entrepreneurs and ask them what they think are the biggest obstacles that are holding them back from the success what they really want to achieve, they usually say in this order: #1: Lack of money. #2: Lack of time. #3: Lack of support and mentorship. So, other entrepreneurs seem to succeed against all odds, so do you agree with these entrepreneurs or do you think it’s something else that’s holding them back. I mean, these massive impact entrepreneurs have this unlimited sense of possibility, so what do you think that the ones that are still kind of struggling with these limitations and scarcity, what do you think that they need to tackle?
Scott: I think they need to stop giving themselves so many excuses on why they can’t be successful. I think that the biggest thing that keeps most people from achieving anything or everything that they want in life is the BS stories they’ve created on why they can’t have it. And like I mentioned earlier, I do not know one successful entrepreneur that started with everything that they needed. Every single one of them, whether it was money or it was time or it was mentorship, what they did is that they identified what it was they needed, and then they found a way to accumulate the resources they needed every step of the way.
Lorna: So Scott, when I talk to my audience of entrepreneurs and ask them what they think are the biggest obstacles that are holding them back from what they really want to achieve, they usually say in this order: #1: Lack of money. #2: Lack of time. #3: Lack of support and mentorship. Yet, as we can see, other entrepreneurs seem to succeed against all odds. So do you agree with them or is it something else that is really holding them back?
Scott: I don’t think that it’s lack of anything, I think it’s too much of something. It’s too many excuses that they’ve given themselves for why it is that they can’t succeed. I think that the biggest thing that holds most entrepreneurs from really accomplishing anything or everything that they want in their life is the crazy stories they tell themselves about why they can’t be successful. So what I would say is this: I say, drop the excuses, and get started. If what you need is capital, let’s figure out how to get you capital. If what you need is more time, let’s take a look at what you are doing every day and where you are currently spending your time and find out how we can make some shifts and trade-offs and adjustments. If what you need is mentorship, that’s easy. You can find it everywhere online. You can listen to your program and get amazing mentorship. Everything that you need is available and the greatest entrepreneurs do not wait to get started. The greatest entrepreneurs, they start and they accumulate the resources they need every single step of the way.
Lorna: So many solopreneurs and small business owners struggle working long hours to grow their business. So in a way, it’s kind of like you could provide them advice. You need to go out and find funding, or you really assess where you may be inefficient in your business. But yet, it’s kind of like they’re spending so much time working, they can’t stop working and deal with the game-changing shifts that they could possibly make. So how do you recommend that solo entrepreneurs and small business play a bigger game without burning out, without throwing more work on the table and working around the clock?
Scott: You know the interesting thing is that I’ve had the chance to work in bootstrap start-up environments through launches and I’ve had the opportunity to run launches in big companies for big brands. The difference between a solopreneur and the CEO of a big global corporation is no different. You need to put the right people in place and you need to work your strengths and hire your weaknesses.
For solopreneurs, they may start rolling their eyes and they may say “well wait a second, I don’t have all of the money, all of the capital, I don’t have something that the big company has, an advantage that they may have”.
I have two friends, bot half them are business consultants. One of them, I asked her a simple question, I said what is it that you do with your day, walk me through your day. And she took me through it and she said things like today I’m going to get up, I’m going to take my kids to school, and I’m going to get to the office by 8:30. Then I need to mail some things, I’ve got to go to Staples and go get some envelopes to send these marketing pieces out, I need to go to the printers, print these things and put them on the things, then I have to go to the post office and stand in line and mail these marketing pieces out and do some administrator stuff. And I said what do you do next and she said well by that time it’s the end of the day, its 4:30-5 o’clock, and I have to go pick up my kids.
Now, I really respect this particular entrepreneur, she earns about $100,000 a year. I have another friend and I asked him the same question.
And by the way, the crazy thing about life, these were two back-to-back phone calls. Two people in the same business, they do the same exact thing and they target the same exact market.
I asked him, what is it that you do with your day? And he said, “Well the first thing that I do is I get up and check with my team. I make sure that everyone knows what it is they need to do for that day. I find out what obstacles and roadblocks they may have, and I work to knock those things down. Then I work my strength, I get on the phone and I sell, sell, sell, sell. And then, about 1:00 in the afternoon, I go train for the Iron Man race. I’m going to ride my bike 100 miles! I’m going to go run 26 miles today, I’m going to go swim three miles!”
And I said to him, “Well wait a second, how do you have time to do all that?” And he said “What do you mean, I’m confused?” I said “Well, don’t you have to put together marketing things and stand in line at the post office and stuff?” He said “No, no, no, I hire somebody to do that. It costs me $10 an hour. While they’re doing those simple administrative tasks that I can easily pass off to somebody else, I’m out there working the things that I do best.”
Check it out, this person, who all they’ve done is hand things off to their administrative assistant, this person makes $1.2 million a year, and has successfully competed in over ten Iron Mans.
So one person, $100 thousand, one person, $1.2m. The difference is, there are people out there that play at the thing that you consider work. There are people out there that, when you’re an entrepreneur and you’re stuck at a task during the day, there is someone out there that would just love to do that one thing and do it well. The key is, you need to find those people around you and work out an arrangement so you can hand off that work. And it’s the same thing in a big company, you need to build the right team around you.
Lorna: Yeah, I definitely endorse that, especially right at the beginning because if you are doing everything yourself, even the lowly grunt work, you’re going to be stuck in the same place for a really long time.
One of the things I’ve chosen to do for myself is to move my butt to Southeast Asia; I’m based in Chang Mai, Thailand. And the cost of living here is low and the internet is fast, and this allows me to have five people working for me, and these are five highly-skilled people who are offshore contractors.
A couple of them are digital nomads, a couple of them are based in the Philippines. I have an agency that does my design work in India, and for me to be able to pay these five people to work for me, it’s completely possible being a bootstrapper in Southeast Asia. If I was in the San Francisco Bay Area, I’d feel a hell of a lot more pressure but it’s still totally doable actually for what I spend on my team every month. So I would say hey, if you’re going to bootstrap it and you don’t have personal or familial ties and you can be mobile, come to Southeast Asia.
It’s really funny, just yesterday I saw a BBC article on some friends of mine who have a start-up, and the article was titled something like, “Forget Silicon Valley, Consider Silicon Bali.”
Scott: That’s awesome.
Lorna: There’s a great start-up scene in Bali, in Chang Mai, and in Saigon. And there’s great go-getting entrepreneur communities in these locations so hey, come on out here!
Scott: That’s great. When you’re an entrepreneur, a solopreneur, and you’re getting started or you’re bootstrapping, that’s really the key – is to find things that you have that are of value to others. What’s one thing you have that you do that you play at, that you really enjoy, that could be really valuable to others, who provide a skill or a service that you need. And see if you can work out some sort of trade with that person. And that way, you got two businesses that are going to be able to take off and grow simultaneously, you have two entrepreneurs who have taken pressure off of themselves and it hasn’t cost them anything financially, they haven’t had to raise any money to do it. And so, you need to be scrappy sometimes.
Lorna: I think another thing that really is so helpful if you’re a solopreneur especially, is to get into a mastermind group. That will totally up-level your impact and accelerate your progress. If you’re working all by yourself with no feedback or support, you don’t know what you don’t know, you’re going to keep doing the same things that aren’t working.
So Scott, I’ve heard it said that entrepreneurs are on an accelerated personal growth curve. Do you agree, and if so why is that?
Scott: That’s a good question. If you have a 9 to 5 job and you go to a big company and you start your workday early in the morning and it ends at a specific time and you don’t necessarily need to take your work home with you, there’s a clear separation between business and personal life.
The difference for an entrepreneur is this: their business and their personal life is completely tied together because the role of an entrepreneur and a CEO is likely a full-time, 24/7 type of job. And if your business is tight in cash, it doesn’t necessarily mean that you can’t pay your payroll, it could mean that you can’t pay your mortgage on your house. Everything becomes intertwined and as a result, I think entrepreneurs are forced to confront things and to get better at different personal development-related things faster than others.
I think it starts with understanding how to manage your personal finances and your family finances. It extends to how do you manage your relationships that you have with the people that are closest to you. It moves on to how do I build the right environment so that it will support me and strengthen me so that when I go into my office every day and things are tough, I’m the toughest person in the room because I have an environment that feeds that, and I would agree that entrepreneurs go through personal development boot camp a lot sooner than most people.
And I think if there’s anything that I’ve learned, if there’s any epiphany that I’ve had in my life as an entrepreneur it’s this: it’s that eighty five percent of being successful as an entrepreneur is mastering the personal side of entrepreneurship and only fifteen percent has anything to do with the skills or the stuff required every day to manage your business.
Being successful isn’t necessarily about being the best leader of having the best plan or building the right tem. Being successful starts with getting on the same page as your spouse about how much risk you’re willing to take in your business, how much time you’re willing to give for this business, what kind of sacrifice both of you are willing to make for your family. So it’s really important because if you don’t get the personal side down first, when things get tough in your business, and things always get tough in business from time to time, what will happen is the two will have a spill off effect on one another. And one of the two, the person on the business side is going to break, hopefully not both of them.
Lorna: Yeah, it can be really intense being an entrepreneur. And I think that one of the things that entrepreneurs grapple with is fear. Fear of failure, fear of financial stress and ruin, and so having to confront that and – it makes me think of that mantra in the Dune series, “fear is the mind killer” And therefore, I think that for entrepreneurs, having that really good mindset practices is really important. So I’d love to ask you, have there been any mindset practices that have helped you in your journey?
Scott: Well, I think that our brains are like Google. We were talking about silicon valley earlier and what I mean is this – whatever question you type into Google, it’s going to give you an answer, probably thousands of answers, and the quality of the question you ask will determine the quality of the result. And the same thing is true as it relates to mindset, you see whenever anything happens, you know – being an entrepreneur sometimes is like riding a roller coaster, you wake up in the morning and you get the call that the big deal got signed and an hour later you find out that the big deal fell out, and then an hour later you find out that it came back, and then an hour later you find out that you made the big hire, and then an hour later he took another job, right?
This is what it’s like and so our job is to figure out how to smooth out the ride. Whenever anything happens to us in business, we start to ask ourselves questions. And we do this internally, we have this internal dialogue that’s been going on since we were born, we probably don’t even realize it happens. We’re constantly asking “what does this mean and what do I do?” We start asking ourselves questions like “why do bad things always happen to me?” It’s like typing that question into Google. What happens is you type that question into Google, and Google is going to give you one million reasons why bad things happen to you, that’s what it’s going to do. But if I change the question and I ask, what can I learn from this experience or what can I take away from this experience or how can I use what happens now to get the result that I want an hour from now? What happens is that Google is going to give you an entirely different result. You’re going to get a million different answers that support you as an entrepreneur and smooth out the ride and take you in the direction that you want to go, so I would say that the key to having a killer mindset is learning how to ask a better quality question.
Lorna: I think one of the keys to successful entrepreneurship is knowing what you don’t know, and therefore being willing to ask those questions and find the people that are willing or able to answer those questions as well.
Scott: It is, and a question that I get frequently is, “how do I raise capital?” And the only reason that I bring that up is one of the biggest mistakes when they’re out there raising capital and they’re talking to a target investor is that they try and come off as if they have the answer to every single question. And the reason this is coming up for me now is that I had two people in my office that were pitching me yesterday on an idea, and I really loved the basic idea, I thought they had a really solid vision, but there were some questions that I asked them about their business and I knew they didn’t have the answer, but they tried to fudge it. And what I’ve learned when raising capital, what I’ve learned from businesses is this: it is just fine to say I don’t know, and then go out and find the answer. And by the way, if you do that with a prospective investor or a prospective partner or a prospective anything, what happens is they respect you more, and they gain trust in you. So it’s so important to know that you don’t have to have all the answers. What you have to have is the chutzpah to find the right answer to the question you have.
Lorna: I really love how you have such a detailed section in “Launch” on how to address the funding question, because it is a very big part of launching a product or a business for a lot of start-up companies. So I do get a lot of questions from my audience from where they can find the money so I’d love to ask you, where would an aspiring entrepreneur start raising money for their business, what are the different categories of financing available and where should they begin?
Scott: Well, the place to begin is determining how much you really need. When I ask an entrepreneur how much money they need to start their business, it’s really funny, the most common answer is I need a million dollars. But they don’t really know. And the thing is, today, the costs of getting started are so low that the odds are you need far less than that to get anything off the ground.
And so what I always say is this, number one, let’s get clear on what it is exactly that you need. And then let’s figure out a way to do it for half the cost, and then half the cost, and then half the cost, because I’m really big – and we’ll talk about this a little bit, about when you launch, launching with a viable product. Reducing the amount of risk that you take with any start-up venture.
But I think that beyond that, let’s assume that you know exactly what it is that you need, and it’s time to go out and raise capital, what’s the first thing you do? The first thing you do is this: you have to be very, very clear about who the right target investor is for you. I can’t tell you how many entrepreneurs call me or text me or shoot me an email and say, hey, I got it. I got the big meeting. And if you’ve been around entrepreneurs, you’ve heard this a million times. And what that means is, somebody who invests money has said that they will meet with you to hear your pitch. The entrepreneur automatically thinks that this person must be so excited about their vision that they’re not only going to invest in the business, but they’re going to write them a check on the spot. And they come out of the meeting typically completely disappointed, and they don’t know what happened. And the reason is this, they were talking to the wrong person.
You see, investors like to put money into, number one, things that they know and they know well. And the reason that that’s the case is if I’m a real-estate guy and somebody shows me a tech deal, I have no idea how to evaluate it. If I’m a real-estate person and somebody shows me a real estate deal, I can tell based on my experience whether or not this is a good deal and if I should invest. Also, I know the space, if things go sideways in the business, and I put my money into something I know, the odds are I can jump into that business and help to protect my capital. So number one, it’s important to find out, what’s the background of your target investor or what should it be?
Number 2, people like to invest in areas where they individually have had a great deal of success operationally. Again this has to do with being able to jump into a business and helping to provide distinctions along the way.
The third thing that you need to know about your target investor is this: at what stage do they invest in a business? So, as an example, some investors will like to invest in the idea stage. Some like to invest in companies that have already started to generate revenue so there’s proof of concept. Some like to invest in companies that are much further down the road. So, you may be talking to somebody who invests in your specific industry, in your exact kind of business, but they say no. That doesn’t’ necessarily mean that you don’t have a good deal, it means that it might be at the wrong time for that particular person.
So what you need to do is find investors that know number one, have industry, domain experience, a background in what you’re pitching. Number two, invest in companies that are in a similar stage that your company is in today. Number three is this: you need to understand that the average investment is for that target investor.
So, as an example, is this the kind of person who puts $10,000 into each deal, or is this the kind of person that puts a million dollars into each deal? Because if you go into that big meeting and you ask for a million dollars and that investor only puts 10,000 into a deal, you have an immediate disconnect. So again, it’s domain expertise, it’s stage, it’s how much to invest.
And then number four: what is that target investor’s expectation for return on their investment? So, as an example, some people may want to see their investment times two, times three. They may want to see a ten times return on their investment. What you need to do is you need to understand, over a certain period of time, how much capital will your target be able to take out of the business? And you need to make sure that that amount of money is in line with the kind of business that they invest in. So as an example, you may have an awesome business and you may have a business that you’re going to go out there and build and somebody may buy that someday, but for some reason, that business or that category only typically sells at a rate where that investor can get a two times return on their capital, where a venture capital might invest on a ten time return on a deal. So you just need to make sure that your expectations are aligned from the beginning. If you do those four things, if you start there, and you really build a clear target, then you’ll have a much better chance at building an investor and saving a heck of a lot of time.
Lorna: So, this is all really good, sage advice. But how do you go about finding those people? Should aspiring entrepreneurs start with friends and family and their immediate network first and start hustling from there or can you just go straight to a venture capital firm?
Scott: Well, the way to get started and the way to build your avatar, the perfect representation of your target investor, is this: is again, to get clear on based on what my deal is; what does my person’s background need to be, at what stage of a company do they invest, what is the average amount of capital they put into each deal that they do, what’s their expectation on their return on capital, and when do they expect to get their money out? So that’s the first thing to do, draw out that list.
The next thing I’d do is I’d ask. I would go to people that I know invest in deals, and I would say, who do you know that meets this specific criteria? What happens is really interesting, what happens is many entrepreneurs would say to me something like, doesn’t that make me look weak if I have to ask or doesn’t that make me look like I don’t know what I’m doing or I don’t have a good network if I ask these questions? I guarantee you this: if you go to an investor with a very clear avatar of who you need to pursue, they will respect you so much because number one, you’re on it, number two you’re not going to waste anybody’s time, and number three, the clearer you are, the more clear they can be when they ask their Google-like brain, who do I know that fits this very specific criteria? And the odds are they will know people and they will be able to find them faster for you, and get your deal closed faster.
You know, it’s really interesting. You can be, let’s say you’re in a venture capital firm. So you’re in a firm and let’s say this firm invests in technology deals. In fact, lets say this firm invests in consumer Internet types of businesses. You may be pitching to an investor and they may say no, you may be in the right building, in the right company, just talking to the wrong guy. And so the question is, put together your target list, and give it to people, talk to people, and you will find the right target investor much faster than you can imagine.
Lorna: Thank you so much, that is really excellent advice. So we’re coming to the end of our interview, I’d love to leave you with this last, favorite question that I have which is, what do you think is the most effective way to change the world?
Scott: The most effective way to change the world, I would say, is to focus on being the best you that you can be. To be the best version of yourself that you can be, and I think that by being the best version of yourself, it will have a spill-off effect. There’s piles of amazing qualities that live inside of you, that will have a positive effect on other people.
Lorna: Fantastic. Thank you so much, Scott. How can we best stay in touch with you?
Scott: Well, there a couple ways, the first is: please check out my new book titled “Launch,” you can find it in bookstores all over the world, and online from outlets like Amazon and Barnes and Noble and things like that. You an always go to my website at ScottDuffy.com and we have a ton of tools and resources and videos for entrepreneurs and follow me on Facebook at Scott Duffy Launch or on Google Plus or on Twitter.
Lorna: Fantastic, have a beautiful rest of your day.
Scott: You too, thank you.

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