If you’re a business owner, founder
or CEO, at some point in time, you need money, be it seed capital,
growth capital or expansion capital.
When that moment comes, you'll need to find investors. Unfortunately, quite often, I’ve come across owners and founders who do this at the last minute, and what’s worse, it’s when they’re desperate and needy.
If you’ve learnt anything about neediness – it’s the one thing you shouldn’t be. The moment a Venture Capitalist or Private Equity deal maker finds out you’re needy, that triggers our highly sophisticated antenna, and we’ll have hundreds of questions running through our head, but the first on that list is… RUN!
So let’s get this straight. There are various breeds of private investors:
- the Angels, who focus on concepts and provide
seed capital for startups. They see the most, let’s say around
1,000 companies per month (just a guess).
- their sophisticated cousins, the Venture
Capitalists, carry around larger funds to provide growth
capital for early stage companies. Let's say they see around 500
companies per month.
- Then there are the grandfathers of finance, the Private Equity Professionals, who manage millions and billions to provide growth and expansion capital. They might see see around 100 companies each month.
No matter what, that’s still a lot of companies
looking for funding. Yours could be one among many. Rather than
give you the usual advice of ‘go to networking events’ and ‘become
a business card commando,’ I suggest you take a different approach,
a more silent and more effective one:
It’s called doing your homework. Here are the steps:
- Create a target list. This is the easy part.
Just visit the website of those venture capitalists and private
equity funds you wish to meet, identify whether they really do
invest in your type of company, your sector, your geography and
even the amounts you’re looking for. You can do this on sites like
the EQUITY.IO (shameless plug). This step alone can
save you thousands of hours and prevent you from heartbreak. In
short, you’re dealing only with those who are possibly interested.
Please understand, when a VC says ‘No’, it means a lot of things,
but most likely it means your company is not within their mandate,
so don’t waste your time or theirs trying to convince them to do
something they’re not allowed to.
- Research. Research. Research. Soak up all
the information you can get. Spend some time reading about them and
find out what kind of deals they’ve done recently, what they have
in their portfolio, what interests them, and their pet projects.
As an intelligence agent might say, you want to know
everything about them, from what they did this morning to last
night! (Ok, that’s a bit extreme, but you get the drift).
- Identify key players. This will include the
senior management, leadership team, executive management or
partners. These will include managing directors, executive
directors, directors, principals, managers, associates. Remember,
there are influencers and there are decision makers. Work with
both, but focus on the latter.
- Contact them. You’ll get a better response
from a warm call (from a referral) than from a cold call. Referrals
are the best. See if there’s anyone in your personal network who
might be able to refer you to them. Think about who in your network
could help you, CEOs, top management, other investors,
professionals from law firms, audit and accounting firms, or even
consultants, then of course your colleagues, friends, family and
alumni and last but not least, your contacts on Linkedin. (If you
don’t have any of these contacts you are probably socially
If you have to cold call, just pick up the phone and ask for the person you want to meet. Make sure you have an elevator pitch ready. If you’re not ready to present your company in 3 minutes, you’re not going to get far. After you’ve hooked their interest, ask if you can send them a teaser or executive summary (or even better, a detailed presentation/business plan) by email. I would personally recommend you not worry about NDAs. Remember, ideas are dime a dozen, but the key is execution, execution, execution.
- Follow up. Here’s the secret sauce. I’ve said this before, and I’ll say it again. Everybody’s busy. Investors receive plenty of these opportunities, so reduce the friction and make it easy for them to receive your company information, review it over a few days and discuss it with their team. Then follow up. If you don’t follow up, you’re not going to get a response. Investors also have inbox problems like you and me, and theirs is usually flooded. So don’t lose an opportunity to get funded by not following up. Try to get them to pen a date and time for a meeting or call.
Following the above steps, you’ve just saved yourself HUGE amounts of time and energy and increased your chances of success in fundraising by over 25x, because you’ve done your homework and you’ve come to the deal table prepared. If the investor is interested in you, (remember you’ve already eliminated those who are not in your geography, investment size, sector etc), you’ll be asked to meet them in person. If on the other hand, you think you are too good and that investors should be chasing you… well, you shouldn’t even be reading this!
What’s the alternative? Find good powerbrokers,
matchmakers, advisors, consultants or investment bankers to work
for you, while you focus on building the company.
What do you think? How has your fund raising experience been? Share your thoughts below.