Franz Madlener

People

Franz Madlener

Friday, 08 February 2013 14:34

How much should I tell investors about my idea?

How do you tell potential investors about your idea without spilling every little detail and giving away the whole plan?

 

It’s a straightforward product, which makes it even harder to keep under wraps.

 

Many entrepreneurs have been faced with the difficulty of trying to keep a ‘secret’ whilst having to share at least some details to keep investors interested.

 

Whether at the start-up or exit stage of their business, the three best people an entrepreneur can have in their life are a brilliant and business-savvy lawyer; a brilliant and creative accountant; and a brilliant and realistic mentor.

 

I was lucky enough to find all three very early in my entrepreneurial life. As a matter of fact, I still have the same lawyer after nearly 25 years (Hi Geoffrey!).

 

I had the same accountant for 20 years (until he retired), and have found an amazing accounting firm to move on with. I have had four mentors in my life, with only one (my father) having seen me traverse my, up to now, 27 entrepreneurial years.

 

My lawyer taught me to assume the worst in people but strategise for the best result in business.

 

My accountant taught me there are two sets of numbers: those that tell you the past, and those that try and predict the future (and they are very rarely the same).

 

My mentors have all taught me to try and use the best, to pick the best, to choose the best, to compete with the best, to hire the best, to aim to be the best, and to hope for the best!

 

I asked my three advisors what I should do if faced with your predicament, and they all said the same thing: “Get an ironclad confidentiality agreement for people to sign.”

 

If you also have an introductory “teaser” letter that shows a broad-brush strategy for the business with some predictive numbers, and talk about the human capital behind what you do (the real value of the start-up), this then shows any prospective investor that you know your legal position, that you surround yourself with good advice, you engage good people, and you are ready for their financial and strategic input.

 

Early in my life I read a quote from Henry Ford, which essentially said, “I am not a smart person, but I know how to surround myself with smart people”.

 

I must remember to re-read this more often. Good luck!

Franz Madlener was the Founder and CEO of Villa & Hut and a 2007 Entrepreneur of the Year finalist.  Franz now consults to retailers and the retail industry as Senior Partner of Tier Park, a retail specialist consultancy firm.

 

Ask Franz or any other StartupSmart mentor a question here.


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