There are three myths in the capital raising journey. The first is that it’s about “the capital”. The second is that it’s about “the deal”. And the third, is that it’s about “the one”.
In this article, I am going to re-frame how you look at the value of your company and capital raising.
This is from a keynote given to 300 CEOs, Founders and Executives from USA, Asia and Europe late 2018 at Anthony Robbin’s Wealth Mastery Program.
87% of your stock market value comes from 6 forms of value, yet traditional capital raising focuses on just 3 forms. These only make up 13% of stock market value*Source: Unicorning™ Analytics, Standard & Poors, Additional Analytics
At Unicorning, when we analyzed at the stock market value of businesses that have been super successful over the last decade, we noticed that they have huge valuations in non-traditional forms of value. In fact, we found that non-traditional forms of capital make up 87% of the stock market value. This trend is only increasing.
We found the executives, founders and businesses that build great business are ones focusing on six non-traditional forms of value. They articulate, measure and grow each of these capitals.
What does this mean for you?
The capital that is not on your balance sheet is your capital for success. This is true even if you are simply focusing on growing your business.
The capital that is not on your balance sheet is your capital for successJoanne Flinn
Grow Your Business and Valuation With the Critical Six Capitals
Our analysis found that each of each of these capitals is an answer to an important business question. Here are the six non-traditional capitals to help you articulate, measure and grow your business.
They are framed as questions to spark your thinking.
1. WHY Possibilities
What’s the greater value? What’s the greater vision? What are the possibilities for the world, if this actually can happen? What’s the change your business is making in the world? Example: Tesla sells the possibility of transportation (cars, rocket ships…) powered by renewable energy. People who buy Tesla cars are making a statement about the future of the planet as much as they are investing in bringing the vision to life.
2. WHEN Time
Are you making time an asset? Are you utilizing and managing it well? Getting services and products to market swifter has concrete value. Fast paced hyper growth businesses know this – a month of market is valued in the millions. This holds true for customers too in a super busy world. Example: Atlassian is a software company built around helping business teams use time super effectively so their clients get things done focused, faster and better.
3. WHAT Brand Promise
What will the business deliver? How will people see you? Example: BMW is a lifestyle car with superb engineering. The brand promises that you will be seen as part of the high-net worth elite. It works this promise through may levels of the car, the organization and your experience as a BMW owner.
4. WHO Relationships and Networks
Are you who you know? Who do you know? Where is your influence? Example: Grab and Uber sell you access to a network of drivers while Oxford and Harvard give you access to an entirely different sort of network. In this increasingly social world, the networks are valued and valuable.
5. HOW Technology and Processes
How are you creating opportunities to scale? Are you innovating how things are done? Is your technology helping customers lead better lives, have better experiences or take their business further. Are your processes smoother, more effective and secure? Example: R3, a blockchain company that works with banks, recently had one of the biggest series A funding rounds ever.
6. Intellectual Property
How do you scale your creativity? Which parts are so valuable people will pay for it? Example: LVMH owns many of the world’s luxury brands, its intellectual property is its key source of value, which we can tell by how diligently it tries to shut down fakes.
87% of the stock market value is above the line.
13% of the stock market value is below the line. This is the world of the traditional P&L and Balance Sheet.
Do you have a cashflow pipeline? Is there proof that people value what you are selling? Are the partners you depend on committed? Contracts have measurable value.
Do you have money in the bank? Do you have reserves to respond to emergencies? Do you have a means to invest forward? Can you manage your money? What’s in your P&L and Balance Sheet?
9. Physical Property
Do you have assets that can be used to recoup losses? Have you made enough money to invest in physical assets? Do you have physical assets? In the tech start up world, physical capital is considered old fashioned and slow growth, yet, physical capital has value. Just ask WeWork’s CEO who has made millions leasing property to WeWork’s co-working business.
These three forms of capital are well measured, they’re in the P&L and the Balance Sheet – but if you are growing your business, looking for capital or wanting to increase the valuation of your business, pay attention to whats in that 87%.
Case Study: GRAB, the Unicorn
Have you ever taken an Uber or a Grab? What they did was they created a network where they were always available and relationships where we trust, now we get into a car with a complete stranger. And a complete stranger is happy to pick us up and take us somewhere. What they were able to do was create a who (4) and a how (5) combination that created value and service. Think about how much data they’ve got on us and where they can create new forms of value to us ‘the customer’ and thus to the investor. Grab, which is based out of Singapore, is worth a billion dollars. It’s a Unicorn.
Reframing the capital-raising journey
This journey begins with you. As much as capital raising about the logic and the numbers, the truth is that you are absolutely critical to capital raising journey. You show up in two ways. Firstly, there is your heart, the passion for what you are creating and the belief that you and your team is able to do it. But there also a less talked about element of you: who do you want to be in the journey?
For example, let’s take a look at the mindset around capital raising. You’ve heard of the Dragons Den? It is a great image, it appeals to our inner knight-in-shining armor. Yet, when we see capital raising as going into the dragon’s den, what do we find? We find dragons and danger.
What happens if you shift this perspective? If we see capital raising as a journey into new territory with unknowns to discover and work out, what happens? You are now an explorer or adventurer.
One mindset is about defense while the other the explorer/adventurer keeps you in a growth mindset.
Reframing it this way, you will have a different relationship to the information that comes back to you when you put your proposition, pitch and product out there. You’ll see the information that comes back with a spirit of inquiry, with interest and you’ll have a greater capacity to respond. You will be able to adapt to what’s actually happening. Data from the markets, your customers, or your business partners becomes clues and sign post on your journey towards your business goals.
Unicorning this year
What are you doing to raise your value in 2019? Do you want to be a Unicorn? You and thse 9 forms of capital are behind every successful business.
Let’s converse about your capital raising priorities.