Seth Godin wrote

“Only borrow money to pay for things that increase in value.
It’s a short list: your business, your house and your education, mostly. Stocks if you’re smarter than me. That’s pretty much it.”

He goes on to say that the problem comes from credit card debt for consumer goods. And even if you then spend cash on more things, as long as you have a credit card debt, you are in fact buying things with money you have to pay large amounts of interest for.

Have a look at his post for the strategies to overcome that problem.

I want to add another good opportunity:

Borrow money for things that save you money.

SolarPay.com.au is based on that. Buy a solar hot water system even if you have to finance it. The savings will pay for the system and continue to put money in your pocket.

Another example would be buying a car that uses less petrol and does not need expensive maintenance, rather than running an old bomb that needs constant attention.

In both cases though (whether you borrow money to buy something that increases in value or something that saves you money), you have to make sure that

• the financial benefit is greater than the interest
• you can actually pay it back

Thanks Seth for the inspiration.

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Alexander

I just stumbled upon a company that set up a website to find an investor. Really interesting to see it straight after my post yesterday on showing a Need and a Solution.

They used Google AdWords (you know the ads on the right that come up when you search for something on Google). And the ad took me to a website dedicated solely to showcasing their company and asking for an investor to step forward.

The site gives a quick overview, but two imporatnt things are missing:

1. There is nothing about the clients and how they will get the product.
   OK, one of the products is energy, so it might sell itself (especially if it is clean). However, if that part is easy, it would be good to mention. The other is diesel.
2. It says nothing about the cost advantage the company has.
   OK, maybe they do not want to make that public and will give interested investors the figures after they signed a confidentiality agreement.

Great approach though to use Google AdWords and a website to find investors. But it looks like they have not found anyone, because they wanted to find someone until the end of February and now we are a week into March already.

I have reviewed a range of business proposals for funding recently. What struck me (again) was the narrow view inventors and entrepreneurs have of their products.

“My product is the best, because of these features…” and then they go into a list of features.

Benefits not Features

Every marketer knows that saying: You have to show the benefits, not the features to find a buyer.

The same is true for finding investors. What are the benefits they are looking for?

• A great return
• Low risk
• Sustainability

How can you show that?

A Great Return

There is no guarantee in company returns, especially in early stage ventures. However, there are some things that make a great return more likely.

My first focus is to find out whether there is a need? Not just by one single person, but by lots of people.

This is a complete shift in mindset for many inventors. You need to think like a marketer and understand your market (or find people who can complement your lack of skill in that area).

The second question I ask is whether the new product fulfills the need or solves the identified problem in an economical way?

That does not necessarily mean cheap, but the figures have to stack up on a per unit basis with quantities that look feasible.

Low Risk

I only know of one way to lower risk in early stage investing: having written orders. This is not to say that other risk reducing measures do not play an important role as well. But if I see that orders have been placed already or that future clients have made other substantial commitments, I am more at ease with the investment.

If on the other hand anyone tells me about a billion Dollar market, the risk is higher, because it means they have not identified specific clients and realistic quantities. I have seen forecasts that did not even include any marketing expenses.

No matter how good the product, clients will not beat a path to your door. Great marketing on the other hand can push a mediocre product to success.

Sustainability

I have written before about why I think that business plays the most important role in bringing sustainability forward. In addition the pragmatic reality is that businesses which are not sustainable will not survive much longer.

Ideally the invented product or service is a large step forward (and here the inventor might be tempted to talk about the features), but the running of the company itself needs to be sustainable as well.

If you are a tempted inventor who want to talk about the sustainable benefits in terms of savings in greenhouse gases, water or waste, focus on how that relates to monetary savings for your clients.