Venture Capital For Dummies
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Some companies move quickly through the process of raising capital for their business ventures, and some take a long time to close the deal. The speedy fundraisers tend to be proactive about meeting investors, and when they find the right investor, they are swift about getting them involved.

  • Know what you want: The most powerful thing that you can do to make your investor pitch clearer and to help your negotiations go more smoothly is to know what you and your team want for your company. After you have worked out your immediate and future goals and the direction of your company, your message to the world will be focused and concrete.

    Investors love to deal with people who know what they want. When founders have not yet settled major decisions, the investors can’t be sure exactly what kind of a company they’re working with, and this uncertainty can delay — or kill — the deal.

  • Create a draft term sheet: Founders who create a term sheet are able to discuss terms immediately when an investor inquires. Negotiations are easier, too, when you have a document to start from. A draft term sheet should include statements reminding readers than all terms are negotiable (or which terms are negotiable if some are not).

  • Secure a lead investor: Getting an investor interested is always easier if you already have an investor by your side. If you’re seeking seed round capital, your goal is to find the first investor who can act as a lead and help shop your deal around to other investors. If you’re looking for Series A round venture capital funding, ask your previous investors to help you on your fundraising campaign. After you’re connected to one investor, your likelihood of meeting more is high.

    Past investors are often willing to participate in future rounds. If you have investors from an earlier round, invite them to lead the round financially.

  • Launch a strategic campaign: In addition to having your deal structured and all your documents in place, you need to simultaneously launch a campaign that employs both face-to-face and online channels to get — and keep — potential investors interested. Through your face-to-face channels you generate buzz about your company in a very natural way — through social and business relationships. By posting your company on any of the online angel investment platforms like AngelList or Gust, you can generate interest beyond your network.

  • Meet new people: According to a whole lot of science on the subject of social networks, certain people have more influence than others, not because they are in charge but because they are connected to a larger variety of people than anyone else. The best way to get out of your own social fishbowl and meet new people is through the connectors (people who stay in touch with large numbers of people) and the bridges (people who connect unrelated groups of people) in your own network.

    As you network and make connections, create a database of all the people you meet. Add them to a mailing list (use a free mailing list software product; you can find one at MailChimp). Use the mailing list to send important information about your company to interested investors and those who’ve shown some kind of interest in the past. Include information about your company progress. You can also request help with certain things like new connections or vendor choices.

  • Be visible: You have a ton of work to do because you are trying to run your business and fundraise at the same time, but you don’t have the luxury of staying in. You need to have a public face when you are actively fundraising. Your deal will stay fresh in people’s minds if you are visible in groups where investors will be present at least every other week. Remember to always have good news to share.

    Be careful of the overshopped deal effect, however. Some entrepreneurs shop their deal all over town for a year or two without success. If they haven’t made progress and they are selling the same deal after that long, investors start avoiding them. If you haven’t gotten any leads after three months, head back to your office, rethink your deal, and focus your attention on making progress.

About This Article

This article is from the book:

About the book authors:

Nicole Gravagna, PhD, Director of Operations, and Peter K. Adams, MBA, Executive Director for the Rockies Venture Club, connect entrepreneurs with angel investors, venture capitalists, service professionals, and other business and funding resources.

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