Planning to raise some capital for your startup? Well, before announcing your intentions to the world, take a step back and remember that investors are a notoriously skittish bunch. According to a Fundable study, venture capital and angel investors pour money into less than 1 percent of new enterprises, meaning it may be best to raise money away from the public eye.
A more low-key business fundraising approach isn’t as tough as it sounds, as most entrepreneurs unknowingly do it to some extent. If you’ve read about a startup that’s “killing” or “crushing” its fundraising goals, that’s usually a calculated effort to build the kind of buzz that entices on-the-fence investors to take the plunge before it’s too late.
To combat potential investor hesitance and avoid losing market opportunities, founders need to embrace the idea of the “soft sell.” This involves laying the foundation for future fundraising through a series of pre-funding strategies that continually build a startup’s word of mouth and feed into investors’ natural fear of missing out.
Though this might not result in immediately noticeable fundraising dividends, a tempered approach builds a founder’s and startup’s credibility to the point that intrigued VCs and angels can’t help but want to buy in.
Don’t take this low-key approach to mean that you aren’t super prepared to “sell the dream,” which is table stakes in the startup fundraising game. Remember, once you ask for an investment and the investor passes, your relationship will forever be different. I’ve gotten used to people passing on my startups, and while it’s always a tough pill to swallow, it’s the “business” part of a business.
This is why a more thoughtful approach to fundraising can be key. A strategic approach to fundraising allows you to naturally leverage those who believe in you and drum up as much interest as possible. It’s a methodical, long-term approach, but it’s one that should be ultimately rewarding. Here’s how to put it into practice:
Cold calls and blind emails are wastes of time in the business fundraising world. An unsolicited LinkedIn request or blind tweet will most likely make you look worse, so avoid these tactics like the plague.
Instead, get an introduction from someone they respect, such as a current entrepreneur they work with or a colleague of theirs. After that, read their tweets, study their blog posts, and learn about the person who could be a potential partner of yours. Be patient with the process. It takes time, but it’s well worth the effort and insights.
When you do get that call or meeting booked, make it count. Remember that investors are likely much busier than you, so you should be very courteous of their time.
Seeking advice means finding out whether your company’s story and market position align with how an investor sees them.
This creates a “win-win” outcome, which is always something to strive for because you’ll likely get honest feedback on whether your company is close to being investable. The best-case scenario here is the investor is so interested that he tries to invest today, which happens more often than you think.
If you aren’t quite investable, then you can then ask a great follow-up: What would they want to see from a business like yours to be investable? Understand this feedback, and compile it with the other data points you have received from meetings, blog posts, etc.
You’ll need all the swagger you can muster to continuously push forward and try to get others on board with your dreams. If you don’t feel confident right now, practice every day by forcing yourself into new, uncomfortable situations.
Meet people with the ability to build your spirit up or bring it tumbling down. No one can give you self-assurance because it comes from within. Do your homework, know your stuff, and believe deeply in your goals. If you don’t have the utmost belief in yourself and your ability to execute on this vision, it will be nearly impossible to convince a professional investor to give you funding.
Having a mentor is a powerful asset for any entrepreneur, especially one who will eventually need funding. I hired a CEO coach and joined a CEO group with people who’ve given me invaluable advice. At the end of the day, you want to learn from someone who has been where you want to go.
Mentors provide feedback and expertise, offer a supportive ear, and give genuine feedback. As CEOs themselves, many know the road I’m traveling very well, so I eagerly listen to their cautionary tales and ideas and file them away for future use.
Asking for money to fuel your organization’s growth is hard, but it isn’t insurmountable. The trick is to lay the proper groundwork ahead of time with a little behind-the-scenes business fundraising. Before one penny is exchanged, you should already have the wheels in motion so your favorite angels and VC’s can help fund your business.
Also read: ‘When should you listen to your startup mentor?‘ by Startups.co columnist Emma McGowan.
Jeff Epstein is the CEO and Founder of Ambassador, a trusted referral software company that empowers brands to increase customers, referrals, and revenue by leveraging and scaling the power of word of mouth. Epstein is a lifelong entrepreneur with a law degree from Chicago-Kent College of Law, Illinois Institute of Technology, and a degree in business from Michigan State University.