When thinking about supporting roles, as an investor, it is important to help founders reach value events. But what is a value event? In the book Winning Angels: the 7 Fundamentals of Early Stage Investing, the authors define a value event as “essentially anything that brings a heightened level of excitement” (254). It goes on to mention that “value events are the key events needed for the company to succeed and for you to get a financial win” (254).
The book mentions many examples of value events, which I would like to share my thoughts on. Essentially, you can break the events out into categories like marketing, financial, organizational, operational, production, strategic, and “other” (255).
In the marketing category, some value events that I can relate to are the first real sale/letter of intent and repeated sales. Establishing a repetitive sales process gets an honorable mention because once you get a process in place, items can be produced and delivered more efficiently. The first sale will, most likely, be the hardest…but once the first item is sold and used, you can collect feedback and even get some organic referrals. This leads to repeated sales. Repeated sales are what makes your business grown in monetary value. If your business sells nothing, it’s worth nothing. In my eBay store, I have an established sales, handling, and shipping process. It also feels so good to keep getting sales because I place a fair value on my products and pride myself on quality.
In the financial category, raising a venture capital round is the topic I’d like to write about. It is my goal to grow my business to such a scale that someone wants to purchase the company. Then I want to go and do it with another one. I’m happy knowing a product I created is now available to the public…I don’t have to run the company forever. In fact, I’m hoping for early retirement! If you aim to seek a VC round, then your plans are to grow the business to a scale that’s appropriate for VC funding. Setting the bar high is a good way to achieve!
In the organizational category, transitioning from a hustling entrepreneur to a delegating entrepreneur is my personal goal. I want to build my business from the ground up, but I have no desire to stress myself out for the rest of my life running my business. I’d love to pass the reigns on to someone I trust and then take some time to work on how to scale the business for sale.
In the operational category, attaining verifiable per-unit profit margins would be aspect I’m most interested in. Knowing this information, definitively, helps me (as the entrepreneur) know how much money I have to continue growing the business.
In the production category, building the first prototype would be the most important to me. Clearly, the business is based around the idea. If the idea is a product, you have to make the product to get people to buy into your idea more easily. Having your product ready and available for feedback from investors, and the public, is a great way to help succeed in raising capital and growing the business.
In the strategic category, identifying potential buyers of the product would be most important to me, closely followed by gaining a strategic investor. I would not, necessarily, be looking for a partner…so I wouldn’t focus too much on that. However, knowing who will buy my product is key! I need to know who to market to in order to be able to sell my product. Finding an investor that is well versed in my industry and can help get me into major retailers would be of tremendous value…probably more so than the initial cash investment.
In the “other” category, all three concepts listed in the book would be equally important to me. Having a business model that will generate great margins is key to growth. Having a product that people buy in to is the only way I’ll be able to sell a product and produce margins. Creating a foundation for growth is the only way I’ll be able to reach exit goals, and that starts with a good product and great margins.
Amis, David and Howard Stevenson. Winning Angels: the 7 Fundamentals of Early Stage Investing. Pearson Education Limited, 2001.