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Wednesday, January 23, 2013

Lack of social networking may hinder investment in your company


Originally, I would have thought this title was insane.  How can such a statement be true?  The answer resides in that type of company you have and how investors view you as the CEO and leader of the business. 

Take as an example a company planning to develop a business creating a software application intended to bring customers and service providers together.  You develop a business plan demonstrating the value proposition of the business.  You offer the marketing strategy in the plan and show how marketing would be to both service providers and potential customers.  Perhaps you intend to use the internet social networks to help launch the program and help bring the customers together with the providers. Remember this is hypothetical!

The investors review your slide show and invite you to present to formally to the group.  You make an excellent pitch and the investors love the company.  The investor group is happy with your answers to some of the initial questions and they elect to move to a formal diligence process.   If you recall from previous posts, your company is not the only one the investors will see at any given time.  They may see several businesses, which could even be similar to yours. 

One of the factors reviewed in the diligence are the people.  You can consider the people review any way you want, but be assured that the CEO is one of the team reviewed extensively!   CEOs are the face of the company and investors often review a wide range of topics, like the following:

·        Contact network – The CEO must be able to generate partnerships and raise capital.  Investors want experience and reach to companies and the investor pool.  Leaning on the job for this one is a minus attribute.

·        Ability to excite investors – The CEO must be able to present a great story to investors and convince them to invest. 

·        Understanding of the business – The CEO must understand the business and markets.  This includes the aspects of how the marketing is to take place and management of the process.

·        Leadership and team building – The CEO must be focused and be able to lead the team to achieve the milestones that create value.  In addition, the CEO must be a person that can attract talent to the company and keep them happy once they join.

Remember, this article is a discussion of whether you are at a disadvantage because of not having a social network established.  The proposed business presented data showing they planned to use social networking as part of their marketing strategy.  In diligence, the investors learn that the CEO has no experience in social networking but a different company looking like a great investment has a CEO with such experience.  Both investment opportunities appear to be great to the investor group, but one CEO is less experienced in social networking.

You can guess what the investor group may do.  In fact, the company and description are not related to the actual case, but the passing on an investment because the CEO was not familiar with social networking actually occurred.  YES, the group passed because the CEO was not experienced with social networking!  So in short, if your company has social networking as part of its projected operating plans, your lack of experience may cause an investors to pass on the opportunity.

 
Taffy Williams is on Twitter by @twilli2861.  Email questions to twilli2861@aol.com. More is available via his companywebsite ,  photo website, or “LIKE” ColonialTDC on Facebook.  You can also find him in the group StartupGroup on Linkedin. Other articles are in the Charlotte,NC- small business section of Examiner.com.

8 comments:

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