Fund Raising 101
Updated: Mar 19, 2020
This is an article “Fund Raising 101” by Marc Primo.
It’s not hard to see how planning is arguably the singular most important step when looking to raise funds. You don’t just go out there and ask for money, no matter how noble your startup idea might be. These days, the once effective “ready-set-go” approach just won’t cut it anymore when it comes to pulling in investors for your fundraising campaigns.
Fundraising has evolved into taking some specific and deliberate steps for it to work. Here’s how you can avoid some basic mistakes that many startups usually make because of sloppy planning.
Make a Spreadsheet. The first step towards an effective fundraising campaign is to make a list of potential stakeholders who you can tap for help. You’d want to create an Excel file of all the people your team can exchange ideas with and become investors or advisors for your project. Within that file, you should include every prospect’s portfolio, address, networks, notes, and a column for the succeeding steps you have to take in closing deals with each one.
Rank investment opportunities. Once you have a list that includes all relevant information, what you need to do next is rank them according to priority. This means you’ll have to categorize your prospects on whether they have passed your standards and how closer you are to forging deals with them. Limit your list to not more than 10 potential investors per category to keep it realistic.
Remember that you may have to court each investor simultaneously and it matters which deals you need to prioritize in terms of spending your time, effort, and attention. Categorize investors by rows, such as one for those with the highest potential in closing a deal with you (not your wish list), another row for those who have potential but need some extra work, and another for those you haven’t tapped recently or need some follow ups.
Determine who qualifies. When doing your shopping list, make sure you review them properly as this would help in qualifying which potential investors are worth running after. For example, if you’re looking to raise a seed round of $1 million and your potential investor is managing over $1 billion, then that deal is probably not worth pursuing.
Next, make sure you target the right investors for your startup which entails studying their brands and corporate citizenship standards. It would prove to be more difficult if you are raising funds for a medical app and you don’t see any linked industry on medical science from your potential investor’s website or record. Other things you should consider are location (as this is important in securing a seed round), and prior investments (whether they have prior partnerships with similar entities such as yours).
Review the partnerships. Not determining which of the right people they should talk to is one of the most common mistakes startups make when fundraising. You shouldn’t be meeting up with middlemen consumers when you can go directly and close deals with the ones who can grant you funds. Cut down the layers and forge partnerships with the people that really matter. You can identify them by how “close they are to the kitchen”, so to speak, or identifying their capacity to influence or make decisions in terms of making investments. What you really have to perform is extensive research on your prospects and the deals they usually make. It’s simply Sales 101 and when pitching an idea, you should know who matters and what potential advantages they might want to get from getting behind you.
Reach out. Now that you have a clear list of potential investors to pursue, what you want to do is make a good impression when you sit down and discuss matters with them. Keep in mind that your potential investors are your customers and you’re selling them a pen with the word “trust” engraved on it. Be smart, likeable, and credible when delivering your pitch, and show off your leadership qualities and expertise. Investors will always be looking for potential and value which means winning their confidence entails having to pass their standards as well. As they are studying your potential, you can also read their stand during your first meeting because, as they say, first impressions last.
Follow up. Lastly, don’t rest on your laurels just because you have gained your investors’ confidence. Remain humble, professional, and follow up on your proposals diligently by offering the next steps. No matter how busy you are, keeping your potential investors engaged always does the trick when it comes to closing deals. And nothing ensures that than a good old follow-through.