Entrepreneurs often complain that investors and funders are slow to move. Yes, that’s true. AND entrepreneurs usually aren’t investment ready. They often don’t have their ducks in a row. Some of the below might apply to you. I hope it is helpful. Ignore what isn’t.
For the sake of brevity, I’m not going to sugar coat things. Here goes…
Use this to manage conversations with investors. Raising capital is fundamentally a sales process and every sales process needs a CRM. Streak sits right in your gmail inbox. It’s free for the first account and $59/month thereafter. For anyone not ready to spend $59 then consider you might not be ready to raise $1m. (I don’t make any money from Streak; I just think it’s the best.)
At first you will say cringey things to investors. Keep pitching until you are less cringey. My friend David Kadavy calls this Embrace the Suck. Initially you will suck. This is true of everything you do at first. Over time you will suck less. Eventually you will suck so little you’ll actually suck less than other people, which is also known as “great.”
Investors will ask lots of questions. Make their life easier by sharing a list of previous questions that were asked with your detailed answers. This shows you’re prepared, it will save them time thinking of smart questions and will make your life easier to have pre-answered questions. I do this in google sheets to make it easy to share and update.
Get knocked down 9 times; stand up 10. (Not sure how the math works on this. More motivational than anything else.)
I always try to remember that more important than giving constructive criticism to entrepreneurs is encouraging them to try again. If they keep on getting up it is inevitable they will get better.
Do the reps.
This is a mindset thing. Supposedly JK Rowling got rejected by 100+ publishers before she found a publisher for Harry Potter. Expect to do 100+ investor calls/conversations before raising your investment. Make the number of times you get rejected be the objective, not the money raised. Get rejected every day. Keep doing this and success will be inevitable.
We help entrepreneurs get these reps in by setting up calls for them so that every week they have calls in their calendar with investors. You can do this yourself as well. Here’s how we increase rejection:
We do the initial screening. Of 100 investors we reach out to 70 reject us.
Then we send you the 30 best investors of which probably 70% will reject you.
The thing is you only need one. So if your ego can handle 99 rejections you will be successful.
Raising money is an email inbox sport, so to speak. Why use outdated running shoes if you want to run the fastest?
Microsoft Outlook is a dinosaur. Also, it doesn’t work with StreakCRM. Using Google IT stack for everything makes debugging any IT issue easier as there are lots of support articles.
One time we lost funding because the entrepreneur’s inbox went down and we didn’t get notifications from a funder that they needed more info—a terrible way to lose.
On a second date last week we got into a lively debate about whether Microsoft Excel or Google Sheets was better. (Trust me, I have the best dates.) I conceded that Excel is technically better in possibly every way. However! That’s not what’s most important. Humans are at the top of the animal kingdom not because we are the fastest, have opposable toes for climbing, can swim the best or even have the most brain cells (elephants do). We are not technically superior. What makes us the best is that we can collaborate with individuals outside our line of kinship. Excel, and Microsoft Office in general, makes collaboration difficult; you have to download and then email and deal with conflicted copies. Meanwhile, Sheets and Google Docs are designed for real-time collaboration.
The result is that entrepreneurs using Office have tons of back and forth. Time is wasted. Time is money. If you switch to Google Docs the turnaround time on DD (Due Diligence) docs can halve.
Just the other day I was working with an entrepreneur who not only used Power Point but had their designer create slides in proprietary software, then import to powerpoint. So now every time we need to update one number or fix one typo we have to go back to the designer. Instead of fixing things in 5 seconds it now takes 5 days (not kidding here). With this kind of workflow, how likely is this entrepreneur to raise money?
If an investor says they are interested and say could you share your data room but then it takes the entrepreneur 1 month to get all the docs together, this is a bad look. The investor starts to wonder “Is this entrepreneur serious?”
Just build it. Here are the docs it should have.
Best to organize in folders in a logical way so that investors can easily find things:
Certificate of Incorporation
LinkedIn links for key staff
News articles about your company
Webvan raised tons of money around 2000 and then crashed and burned.
Then in the 2010s Rappi, Glovo and Instacart, etc raised $ and now are worth $$$.
Practically the same idea. But some got the Why Now? question right.
The other day an entrepreneur told me about his business to produce a special essential oil at a MASSIVE scale. But something didn’t add up: essential oil is nothing new. Why would now be the right time to do it? If this is so great why has no one else done it? I was confused and, as they say, a confused mind never buys. (If I took on this client I’d be trying to convince investors to “buy”).
After lots of back and forth it finally came to light that this essential oil crop only grows well in this particular country because of climate needs. AND the government of that country had banned private companies from producing it…until a few years ago when the ban was lifted. This meant the entrepreneur had unique timing to be the first private company producing this essential oil in the best climate. The Why Now was answered.
There are three dimensions to Why Now?
See: Single Biggest Reason Startups Succeed TED talk
The other week I had an onboarding call with an entrepreneur. On his LinkedIn it said:
CEO @ startup 2021-present
Biz Dev @ startup 2016-2021
So I assumed he had taken over the role of CEO and wasn’t the founder.
“So when did you take over from the founders?” I asked.
*pause* Something was off.
“Wait, are you one of the founders?”
“Are there other founders?”
“Wait, so why were you biz dev?”
“I had to give myself a title and didn’t want to look too egotistical being the CEO”
For the love of all that is holy, please change your LinkedIn to say Founder and CEO since 2016. Let’s not be modest. Investors need to know who they are talking to. Founder and CEO is a very different person than the CEO who took over after 5 years.
I was onboarding a founder of an FMCG (Fast Moving Consumer Goods, think spaghetti, cooking oil, soap, etc). This was the second meeting and I was trying to figure out how to pitch why they were special in a competitive industry.
“So…what is your background? What were you doing before this?”
“I was Head of Sales at [FMCG Company].”
“Oh yeah? What were your sales there?”
“120 million shillings?”
“120 million dollars?? annually?????”
“Yes. I doubled sales over the 3 years I was there.”
Wait, what?! This entrepreneur knew how to absolutely CRUSH it at FMCG sales. And I wasn’t finding out until our 2nd meeting. This needed to be on the first page of the pitch deck and in any messaging the entrepreneur sent in cold emails to potential investors.
TLDR. Figure out what makes you special and don’t be shy about saying it.
Investors have petrol. They want to throw it on a campfire. So that the campfire gets really really big. They don’t want to throw their petrol on some damp grass. That won’t do them any good. Your business should already have a lot of momentum. How do you show investors you already have a campfire and not damp grass?
I was talking to an entrepreneur running a messaging app the other day who was excited to talk to investors. I asked about the traction the company had. He said they had 900 customers using their messaging app since they started 2 years ago. This is not very good growth for a messaging app. Definitely not a campfire.
Compare this to the essential oil business: that was a once in a lifetime opportunity when the government deregulated this essential oil. Oh, and the company was growing 5x YoY (year-on-year) and had 10x more purchase orders than it’s factory could fulfill. That’s a campfire worth throwing some petrol on.
I see a lot of decks say “Climate change is coming so we need to provide solar water pumps/improve logistics/plant trees/etc.” That may be the case but it doesn’t prove someone wants to buy your product. Companies need to provide value to a specific customer. The reason you started the company might be because you are passionate about some societal problem. Great. But this is not a political campaign to get elected.
Address a *customer* problem.
See my previous post on sales. Asking questions is the most important thing. It shouldn’t be all the entrepreneur pitching the investor. I wouldn’t even know what to pitch until I know what the investor cares about. What do they need? I’m here to help them solve their problem. Once I solve their problem then they can help me solve my problem.
Just this week an entrepreneur said “the meeting didn’t go well. They liked our biz but said our deal was too small.” Okay, I responded. Did you ask them what deal size they were looking for? Because right now you don’t know when you should reach back out. Stop the short term thinking of just trying to raise this round. Keep them in your StreakCRM and reach out to them in 24 months when you are ready to raise your next round.
Every warm lead was once a cold lead.
One way to turn a cold lead into a warm lead is to have a call with them and ask if you can put them on your quarterly newsletter. You can use Medium, Substack or Mailchimp to send around a “Partners Update” every quarter. You can slow drip them info for the next 2 years and by then they will be a warm lead.
The response rate might be low but they are reading it.
This is a low effort way of keeping potential partners engaged (funders, customers, suppliers, friends&family). Plus, writing a quarterly update helps you synthesize what you are learning on the startup journey.
Pro tip: make sure the newsletter is (mostly) not bragging about your company but providing value to the reader. Does it have a cool graph you found that quarter? An article you like in the sector? Job opportunities at your company? Or something entertaining: One entrepreneur I know asks readers if they can identify the mystery plant, and recognizes the people who guess correctly in the next newsletter.
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Again, lots of great tips succinctly explained. Thanks for the actionable items and regular encouragement!