Interview with Leighann Robinson
Interviewee: Carter Jones
Questions:
- What are key questions you must ask a business before deciding to invest?
Intellectual property- who owns what?
Who are their customers? How many do you have?
How much does it cost to get a customer?
How do you acquire talent/ what cost?
What sort of financing do they need?
Why do you need investors?
What is your forecast?
What are your margins? Why are you willing to give up equity?
What’s you exit strategy?
What is your leverage tolerance?
- What is your process when vetting which venture to invest in?
Meet the owners, review financials, research the market- is it a viable idea?
Make sure it’s not a ponzi scheme haha.
Credit checks, background checks, how much history or background do the founders have in the space?
When I am looking at potential ventures I am interested in understanding their vision and business plan. I like to ask hypothetical questions “if this… then that” to pressure test how agile they will be when it comes to decision making.
I look at things like, year to date profitability, market scale and potential, competitors in the space, the previous successes and track record of the entrepreneur. Has the business founder previously managed/ sold a company before? Why are they themselves invested in making a business work?
It’s important that they understand who is going to make them money. They must understand who and where their target market is. If they can’t give me a clear picture of who and where their buyer is then they aren’t going they get very far. I want to know their target audience and how they plan to reach them.
- What would your ideal investment look like?
Quick returns- short term gains. Investments that show results and are highly liquid.
- What market(s) do you think have the most potential to invest in? Why?
Hm, I think this is a tough question to answer. And that entirely depends on your skillset as an investor. You either are a generalist, which in my eyes makes your more opportunistic but also a risk taker. Or, if you are like me, I lean more on my industry experience to qualify investment opportunities, a safer bet. But it is true more risk more reward.
Markets that are hot right now Cybersecurity, AI, meat substitutes. Drugs and pharma are always solid.
- If you were to give someone one piece of advice about investing, what would it be?
Research and truly understand the cash flow.
- How should a startup company prepare to seek investment?
Put together a professional pitch deck and know your numbers. Use your network and find someone willing to make an introduction for a potential VC. Warm introductions will get you a lot further. Be prepared for a lot of no’s. Not everyone is going to share your vision, always ask for feedback, smile through it and keep knocking.
Have a business plan, understand what the funding need is- how long will the money last and what are your direct deliverables.
When do you expect to be cash positive. What are the critical success factors?
It’s also depends on who you are seeking an investment from. Bankers give loans on what they call the The 5 C’s of Credibility- I think it’s a really good foundational practice to prepare with.
Here’s an article: https://www.liveoakbank.com/wine-and-craft-beverage-resources/the-5-cs-of-credit/
Character: Used to measure how trustworthy and reliable you are as a borrower; generally, lenders will evaluate your credit score, credit history ― bankruptcies, foreclosures, and judgments ― and how you’ve handled your debt obligations.
Capacity: This considers your level of cash flow and measures your ability to repay your debt obligations; banks and lenders are looking to see if potential borrowers have enough cash to pay back what they borrow
Capital: Banks and lenders look at your level of debt and use your capital as a measure of your leverage; the more equity you have, the lower your leverage, which is a positive thing
Conditions: Banks and lenders want to understand the current condition of the market, industry in which a business operates, economic environment, how the borrower intends to use the money, interest rate, and the size of the loan; they also want to know how a borrower plans on using the funds from a loan and how the conditions could impact that use
Collateral: The business and personal assets you can pledge to back the loan; for loans that don’t require collateral, like an unsecured loan, the other four characteristics may have a higher level of importance
- How do you define risk?
Risk is just the unknown. Business owners try their best to minimize risk by having a plan.
From an accounting perspective you want to try and figure out the capital outlay and if it’s worth it.
I worry a lot about opportunity cost- are they being the most effective with the time and money that they have. Which basically is saying if the focus all their time on one segment of the business, then what are they missing out on somewhere else.
- What does success look like to you in regard to investing?
Getting a financial return equivalent to the risk taken. Generally, more return more risk.
- Should everyone invest in businesses?
Everybody should be in some ways, you aren’t going to retire with one source of income. If you want to invest though you have to do your research, always be reading and just knowledgeable not only about what your passionate about but what is going on in the world.
- How do you find investment opportunities?
Usually through my network and colleague referrals. Always remember that friends and family usually get first dibs on equity and investment. Small or large it usually starts with some cash from someone you know. Occasionally through industry associated referrals. And then technically I do have financial advisors.
