How to bring on investors?

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The Constitution template that I used for my company has 20+ different kinds of shareholders identified – from ordinary to founder to nearly the entire alphabet. While I had a few companies in the past, I’ve never brought on investors to help fund the businesses before. So, this is all new to me when the capital required for my new business exceeds my savings.

It’s incredibly common to hear start-ups talking about bringing on investors whether in person or in books and interviews. We also talked about this at business school too, but I naively thought shares were issued in order of the time of when you received in investment i.e. A to Z. This doesn’t appear right.

Why is it that no one really gives you the step by step of how to bring on an investor for your business?

For instance, which of the 20 different shares do I try to “sell” first? Some have voting rights, some have dividend rights and some have both. Also, if I use convertible notes (loans that eventually change to shares), what kind of shares would they normally convert to, and what about employee share options? Which ones should they get?

If anyone knows of a good book, please let me know. Otherwise, I’ll share on this blog as I gather more info. I still have so much more to learn.

I say molds, you say moulds

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I spoke to the manufacturers today about my Request for Quotes. I think we’re all on the same page now. Essentially, they believe they can give me unit product costs estimates, but will struggle with giving me the moulds’ prices until they have redone the design work. That’s because the moulds (or tooling) are outsourced to other companies.

What I have also learned is that there are many things to consider when designing the moulds. For instance, I can combine parts or create multiple pieces of the same part in the same mould. The bigger the mould, the more it costs. However, I can save money in the unit cost. Of course, if we get it wrong I might also have a lot of excess parts the customer doesn’t need.

I’ve also learned that it may be possible for the manufacturer to amortise the tooling cost into the products with them essentially acting as a bank. That could be really useful depending on how much money I can raise from investors. I’ll be surprised if they’ll do this though without a large order – something I can’t agree to do until the products are proven.

I’ll write a longer article next week about what I might have done differently in the design phase.

If I make it too hard for business partners

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I’m starting to get feedback on the product designs from the manufacturers. Even though I told them that it was only meant to convey an idea of what I had in mind, I think they are evaluating the designs as already fit for manufacturing because I sent them CAD files.

I’ve asked for a phone call with one of them in the morning. I have a feeling that I’ll need to jump on a plane and spend a day with each of them to get the information I need.

I would have done this already, but I didn’t see how I could get competitive quotes this way. I still can’t, but maybe by meeting their teams and seeing their factories I can choose a partner and go on from there. Right now, I risk losing their interest in my business if I frustrate them too much.

Feeling naive…

Deloading Phase

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Right now, I’m mostly waiting – waiting for my product prototypes to be designed, waiting for the new Financial Year to formally incorporate my new social enterprise, waiting for certain deadlines to apply for grants, waiting, waiting, waiting. And I’m just not that good at waiting.

So rather than having a pity party, I’ve decided to spent as much time right now studying and planning for the future of the business.  As author Tim Ferris would say, this is my “deloading phase.”  I’m reading as many books on my “to read” list right now, and creating plans.

Plans for testing the product, plans for the product launch, plans for cashflow, plans for future employees, plans for marketing on a budget.  Many people would say that I’m rich to have some much “thinking time” on my hands right now.  So, I keep reminding myself not to waste this valuable resource.  Today I plan because soon I will be crazy busy again.