Hopefully you have already read Part1 of this series, if not click here
So, you have got your investor deck, financial projections and operating plan… now what?
Ready to go and see an investor? …Not yet!
The next important step before looking for investment is the “kill test”.
The kill test is not something you can do by yourself as you will not be subjective enough.
You need to find what is called a “Critical Friend” – someone who you trust but isn’t afraid of telling you how it is – warts and all.
In order to carry out the kill test, you need to go through your investor documents with your critical friend and basically… kill the idea!
What this means is writing down all the issues, all the things you don’t want to think about, all the things that you are sure “aren’t an issue” or “we’ll find a way around it”
Write down all the issues in a table – if there aren’t at least 30 issues you are kidding yourself and you need to find another critical friend!
Keep going until you feel like the idea is actually terrible and has no chance of success. That is when you have finished the process.
What you need to do now is go over all the issues one by one and work out a Mitigation Plan.
This is basically something you can do to circumvent the issue – it may mean having to refine your operating plan, financial projections or investor deck, and it may be that you can’t fix all the issues in which case you leave them as a risk in your operating plan, but at least you are now aware of it.
I ask entrepreneurs to do this process a couple of times to make sure they have caught everything as entrepreneurs and investors hate surprises!
The next blog will talk about how find your perfect investor and what to say in the Den (or more likely in my case, Starbucks over a Grande cappuccino).
Here are Fusion we have worked with a number of startups and established businesses assisting them with business planning, financial modelling and getting them ‘investor-ready’.
Why not get in touch and see if we can help.