Lack of financial literacy among business creators is a pure delight for investors
Financial culture (particularly that concerning capital investment) must be initiated in education from upper secondary school, at least as much as corporate culture. Indeed, if future project leaders had a better general knowledge of the ins and outs of financing emerging companies, they would better understand the constraints of their future investors.
By knowing how to put themselves in the shoes of their potential capital providers, they will improve their skills in financial negotiation (in particular that concerning the opening of the share capital of their start-up), which will automatically accelerate the conclusion of financial partnerships.
It is difficult to quantify globally, but it is a reality: a fraction of the failed deals originate from the lack of preparation and / or financial qualification of the project leaders. You should know that venture capitalists do not necessarily want to spend a lot of time explaining to novice business creators the technicalities and intricacies of all the terms in their letter of intent. And the prospect of having to wait until the founders have consulted their lawyers to possibly renegotiate all or part of the term sheet rejects more than one: they prefer to move on to another file!
Disseminating a favorable financial culture is difficult because the number of trainers in capital architecture of emerging companies (financial structuring of their transactions) is infinitely less than the armies of “start-up coaches”, very often self-proclaimed, declaring themselves capable of propagating corporate culture!
Currently, the lack of financial culture of project leaders and their guides is a pure delight for investors who are free to dictate their conditions and who have no reason to leave their comfort zone. Therefore, if the venture capital market is swallowed up by bureaucratic investors with deep-rooted habits, methods and prejudices, there is no chance that in our regions we will be able to finance future GAFAs in the future.
And yet those who dominate and lead the game of capital investment also lack financial literacy. Indeed, network business angels are not often sophisticated investors, and some seemingly sophisticated investors (venture capitalists, family offices, etc.) do not always master the investment techniques they advocate and / or impose! It is a reality totally masked by the lack of culture in entrepreneurial finance of project leaders and armies of support staff of all stripes.
The majority of “business advisers”, or “startup coaches” in public, semi-public and private support for the creation and financing of businesses are young, graduated, intelligent, friendly, helpful, but … they have never set up and developed a start-up themselves! And their inexperience isn’t necessarily offset by overdeveloped insight, it seems. Like the blind who have particularly keen hearing.
These investment managers are never visionaries, they are financial analysts, often academics, having held administrative and financial positions, in the public or private sector (banks, insurance companies, financial departments of large companies, etc.) who swear by through the formalism of the business plan (as a key to the selection process), in short the only tool for legitimizing their intermediation (added value) since they have no concrete, personally lived experience of entrepreneurship.
They imagine that they know the reality of entrepreneurial risk-taking because they live by proxy the experience of the entrepreneurs and investors they work with or because they draw on feedback from the entrepreneurs they advise.
All established entrepreneurs will tell you that the quality of advice is not the same whether it comes from a financial analyst or a start-up entrepreneur.
Carl-Alexandre Robyn is apartner and founder of Cabinet VALORO, atauthor of the practical guide “Start-up: Pitchology manual”.