The Art of Startup Fundraising. Alejandro Cremades
day to make the impossible possible.
FOREWORD
My mom always said it was never a good time to have a baby, and she had 10. Whenever she told my dad, “Okay, Eddie, I'm pregnant,” he would run right out and buy another bed. When I started the Corcoran Group, I grew the company the way my mom did her family. We grew from 6 to 60 salespeople in our first five years, and from 60 to 1,000 salespeople over the next 20 years, because I knew the secret to growing a business fast is to never wait until you're ready.
Every great entrepreneur I know expands long before their business is ready. It's the only formula I know for aggressive growth. It forces you to think faster and move smarter because you're always overextended and you have to pay the rent. With growth, many times additional funding is required to support the operations.
I sit in a privileged seat as a shark/investor on the Emmy-winning reality show Shark Tank, and each season we hear hundreds of heartfelt pitches from passionate entrepreneurs who are looking for funding. We listen to pitches for everything from the ingenious to the ridiculous, and get to put our own hard-earned money behind the concepts we believe will be big winners. Once a deal is closed, the fun part begins when I get to work one-on-one with the entrepreneur with whom I'm investing. I shepherd them from dream to execution, past all the hurdles and hard times, and if we're all a little bit lucky, on to a genuine, breakout success!
However, before I put my time, my money, and my partner's money behind any entrepreneur, I want to know everything I can about them and make sure every business I choose is a real winner. Investing in startups is a very risky business. Most of them fail, some eventually prosper, but only a few make a 20-to-1 jackpot return.
First, I'm looking for an entrepreneur with street smarts. Most of the entrepreneurs I've met don't have street smarts, and too many of them have answers that are way too smooth for me to trust. I'm trying to single out the winners with good gut reactions who are also smart enough to trust those reactions. I'm looking for entrepreneurs who can size up people quickly and motivate them, and spot opportunities where others see only obstacles. This takes not the usual book smarts, but real live street smarts.
I want to invest in the risk takers. Every great entrepreneur I've succeeded with has an unusually high tolerance for uncertainty – in fact, they're turned on by risk. Too many would-be entrepreneurs have buttoned up business plans with lots of numbers, fancy projections, and reasonable deductions. Those aren't the ones for me.
I want to put my money on entrepreneurs who know how to get back up fast after they've been kicked in the gut. They get knocked down just like us, but unlike most of us they take very little time feeling sorry for themselves. I sometimes think to be a great entrepreneur you need to have a low enough IQ so once you're knocked down you're too stupid to lay low, and instead pop back up saying “Hit me again!” I don't think you can learn resilience; it's a built-in attitude.
To me, this is what can make or break a pitch. The best entrepreneurs have faced challenges and risen above them. That resilience is what I'm looking for when I hear new ideas on the show (and in life).
I need to invest in founders who know how to communicate. I've learned that a new business goes nowhere if it doesn't have a good salesman at the helm. Somebody's got to sell the new product or service and that's the job of the founder. At the end of every interview I find myself asking, “Would I buy from this guy? Is his sales pitch irresistible?” Based on the answer to that one question, I turn down 95 percent of the businesses that are presented to me.
I've learned that the number-one rule in sales is that everybody wants what everybody wants and nobody wants what nobody wants. When you tell someone they can't have something, they always want it more, but let that same person know there's plenty to go around and they'll always go home to think about it. If you don't have people clamoring for your venture, you've got to dream up a way to create the illusion that there is demand. This is why salesmanship is key in fundraising.
Good salesmanship is never anything more than emphasizing the positives and playing down the negatives. And if you can find a unique gimmick, you'll have a huge leg up when raising capital, and also over your competition while you are executing on your vision.
I first learned the power of using a good gimmick as a young waitress in a New Jersey diner, trying to compete with Gloria, a blond bombshell with attention-grabbing breasts. Following my mom's advice, I tied red ribbons to my blonde pigtails to look like the innocent virgin I was. My tips immediately doubled. When I started my real estate brokerage company, the Corcoran Group, I used lots of gimmicks to build my brand.
I'm always looking for someone who's a bit arrogant, as I've learned that aggressive entrepreneurs bring home the bacon. They make lousy employees, have issues with authority, and don't want to be told what to do. I like to put my money in the hands of an entrepreneur who thinks he or she knows more than me. They'll need that kind of confidence to jump over the huge obstacles that stand between them and the finish line.
What I like best about angel investing is that I get to use everything I've already learned on Shark Tank. How do you impress an angel? How do you win their confidence and get their investment? There are tons of new business ideas out there – good, bad, and crazy – and I've seen my fair share of them all. The difference between a good idea and one that makes money is simple: It's gotta make sense. The idea can either be a totally new invention lots of people will use or a much better way of doing something that's been done a hundred times before.
Another key ingredient that I look for when investing in a new company is work ethic. Before I invest in any business, I'm looking for a partner. A fancy website may get me in the door, but if you can't woo an angel, you won't woo your customers and build a huge success.
This book by Alejandro Cremades will help entrepreneurs in obtaining a clear understanding of how fundraising works and what it takes to be successful in the process in order to impress people who invest in the startup ecosystem, like myself.
Alejandro's experience as the founder of Onevest makes this book unique, as the fundraising game has been changing substantially over the past years with the implementation of new laws that were introduced with the JOBS Act. With the capital moving into the online world very quickly, this book should be a must-read for any entrepreneur who is beginning to raise capital to build their venture.
ACKNOWLEDGMENTS
This book would have not been possible without the patience of my wife, Tanya Prive. At the time of writing this book she was pregnant with our first daughter. Tanya is the love of my life and without her by my side I highly doubt I would have been able to make it this far. I still remember the day I called her and said I wanted to give up my legal career to change the world. She did not hesitate for even a second about jumping on board with me on this crazy journey. We have experienced many ups and downs together. She is my better half and cannot wait for what the future holds for us.
Thank you as well to my parents, Bernardo Cremades and Leticia Roman. They have been my unconditional supporters and are always there for me when I need them the most. My father has been a great inspiration to me, as he also started his own business away from home when he was young. My mother has been concerned for me during the hard times and has always picked up the phone at 1 A.M. when I needed to talk to someone.
My brother, Bernardo Cremades Jr., has been a great sounding board as well as being my best friend. He is the godfather of my daughter. In fact he was the first investor of Onevest, before we even had PowerPoint slides. When we were young he took care of me and always looked after me, making sure that I would make the right decisions at school and outside of school. When I told him that I wanted to give up my law career and start an entrepreneurial journey, he was incredibly supportive. My sister-in-law, Beatriz Larrea, has also been amazing and understanding at all times.
Furthermore, I would like to thank my father-in-law and mother-in-law, Robert Shereck and Gisele Prive, not only for their generous support but also because they have been a very valuable asset with the work that they have kindly given our team in order to