This Strategy Increases Your Chances of Raising Money from Investors | Ep. 102
Summary
Raising money from investors is as much as an art as it is a science. There are so many moving parts to making it happen from…
finding investors…
Having the right pitch deck…
presenting your pitch in a way that makes it attractive to investors…
negotiating deal terms and knowing how they effect your cap table and your business, to…
getting the money wire into your business bank account.
We entrepreneurs need to do every single thing to increase our chances and in this episode a spell how a time tested strategy you can use that increases your chances of raising money from investors.
I’ve used it several times and it works.
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Hello Friends. Welcome to the show. Today. We’re talking about a strategy you can use to decrease your time to close and increase your chances of raising money from investors. Here we go. Welcome to build the business success secrets. The only podcast that provides straight talk for entrepreneurs whether you’re an entrepreneur starting with an idea or growing your business. This show is for you. We’ll teach you how to build a strong mindset, powerful body and profitable business so you can achieve success. And here’s your host, Brandon. See White,
I’ve used this strategy and I can tell you it works when I’ve raised money from investors and here it is. Before you raise money or even think about going to raise money, go meet with some investors. Now do your research, make sure that these investors would be a fit for your business at some point and go meet with them even though you’re not raising money in it’s way too early. And here’s why you’ve got to create a story with an investor. An investor wants confidence. They want to know some predictability.
This is a high risk venture when you’re building an early stage company, No matter if you’re a zero revenue or up to 50 million, there’s still risk involved. There’s always risk in the business, but there’s risk in these early stage ventures and an investor wants to make sure that that risk is decreased. And how do they do that? Well, they have confidence in you. So here’s what you do. You go out and you meet as many investors meet your bank and just say, hey, I want to tell you what I’m doing. I think I’m going to raise money.
And then at the end of the meeting, they’re probably going to tell you, well, it’s too early and you already know that you probably have learned a ton of things in this meeting because if you picked the right investor, they’ve asked you a ton of questions about your industry that you still might need to answer or still need to figure out or you didn’t know. And at the end of the meeting, you say, Hey, can I stay in touch with you and keep you up to date on my progress and what you do every month as you follow up with all of these people you met with and you give them a quick update. Don’t make it long because people don’t have a ton of time.
And investors see a lot of deals make it short, make it to the point, but document your progress. And here’s what happens when you do go to raise money. They already know you. You already told them that you are going to hit these goals. You showed them that you are hitting your goals and they have confidence in you. That will increase your chances with an investor to land the deal. And it will decrease your time to close because they already know you they are comfortable.
They don’t need to have those four meetings or for updates before they’re willing to pull the trigger and invest in your company. They already have the story. What a lot of entrepreneurs will do is they’ll get to a point where they say, well, I want to go raise money. Usually don’t have as much burn rate, enough time that is with the money they have left to get to a closed investor. And it puts them in a terrible situation when you need money and you’re going to go out of business or you can’t make your payroll. That’s a terrible time to negotiate.
You don’t want to negotiate that what you want to do is prepare beforehand so that when you get there, you understand the time, there’s some general rules out there that say it’s going to take you like one year per million dollars that you raise. Is that an absolute rule? No, it’s just a general guidance. It takes a lot longer to raise money than you think just to get through the diligence and close the deal docs and go back and forth with the lawyers and all of those things. Now, this could be accelerated with some angel investors.
Yes, there are opportunities with an angel investor who might just write you a check on the spot and you might be able to use some seed series document or something like that to close very quickly. But to get to any significant amount of money, it’s probably going to take you a little while if you got lucky and you say, hey Brandon, I’m listening to this and I did it in X in X, Y, Z 10 days, awesome. But that’s not the norm and you shouldn’t plan on it. I’ve done that too. But I’ve also done things that have taken nine months that I thought were going to take three taken awhile. It’s just one of those things legal work.
Getting investors who are in professional firms, not an angel investor, not that they’re not professional, but more of a corporate venture firm. They have partners, they have to get on board, they have to get by in, they have to pull money down from their LPS to have that cash to invest in your company. There’s a whole bunch of things in the operation part of closing a deal that just take time. So before you need to raise money, go meet with investors do that research and then update them on a regular basis and show that you’re making progress and that when you say you’re going to do something that you do it, that first thing is just following up with them every month.
Then they know that you have regular updates and don’t be afraid to tell him you didn’t hit your goals because investors also are going to quote unquote test to see if you’re willing to deliver bad news. What’s important is if you don’t hit a goal, explain why you think that happened and what mitigating steps you’re taking to fix it. That is something an investor will invest in. And that is something that you can’t just do in a 1st, 2nd or third meeting. Neither of you can find out that about one another. So plan ahead, get some investors on the schedule, start meeting with them and show your story to success so that you can close your round faster and have a higher likelihood of getting an investor to invest in your business.
Thanks for being generous with your time. And joining us for this episode of build a business success secrets. Before we go, let me ask you a quick question. Are you the type of person who wants to get 100 out of your time? Talent and ideas. If so, you’ll love our monthly built a business success secrets newsletter. It’s a monthly playbook about the inner game of building a successful business. Recent issues have shown how to avoid losing money on Facebook and Instagram paid ads with this science-backed strategy.
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