Investment capital jump-starts a business. To unlock the flow of funds, the golden rule of raising money is structuring and presenting your proposal to win over investors.
That's what Jonathan Martin, president of WEKA, a software development company, has learned. WEKA has raised $135 million in investment capital with his help.
How do you do this? Strategically deliver your company's most attractive investing points, he said. Nail down the fundamental details that are most important to your investor audience. Don't make investors work to figure out why they should invest in your idea.
Pulling this off will gain investors' confidence and give you the best opportunity to earn their investment capital.
Treat Time As Money When Raising Investment Capital
Be brief. Investors are slammed with other pitches. "Assume you have 10 to 15 minutes to get them excited," said Sean Behr, CEO at Fountain, an online recruiting tool. Behr also has built four successful companies, raised hundreds of millions of dollar and invested in over 30 companies as an angel investor.
"Most times investors are either interested or out after five or 10 slides," he said.
In addition, keep it simple. "If you only have a short window to get an investor excited about your company, don't have them trying to figure out your business," Behr said. "Any minute where they are confused is a lost minute."
Be able to say what your company does in a sentence, said Matt Gibson, CEO and co-founder of New Culture. "When speaking about New Culture, I say, 'We make cow cheese without the cow.' "
"If an investor doesn't understand what your company does in the first 30 seconds, they will be disengaged for the entire pitch," he said.
Investment Capital: Remember It Is All About Bucks
Be clear and focused on how your startup makes or will make money, says Pat Dillon, chief financial officer of Flock Freight, a freight logistics technology company.
"Listing 10 different monetization methods can convey that you can't actually make any of them work," he said.
Martin said the best thing you can do is show results, growth or traction. "Customers are your first investors — (venture capitalists) will want to know if they believe in your product and are willing to reinvest in it. This shows that you can execute and it's more than just ideas."
Drill Home Why You're Different To Gain Investment Capital
"It is critical to explain why you are different from the myriad of other startups in your space," Dillon said.
Technology lures competition over time, he adds. "You must be able to articulate your competitive advantage. Why will it expand your lead over time, versus losing to competition?"
Pitch Directly To Your Funding Stage
What investors evaluate and care about most varies significantly at every investment stage, Martin says.
In Series A, investors want to know the value proposition and market potential of your product or idea. In Series B, you must prove your early product viability and show how it will attract customers.
Series C investors want to know your go-to-market strategy. And in Series D it's about whether your financials are strong and if you can grow while keeping costs down.
Help Make The Investment Committee Memo Easy To Write
You may have built rapport with one or more investment professionals at a particular fund, but politics only gets you so far, Dillon says. "There aren't any shortcuts around a full investment committee's process," he said.
Use your personal connections with investors to help them prepare for their investment committee, he says. "Find out what they plan to include in their memo. Provide relevant, objective information they can use," Dillon said.
Every investor is going to do their due diligence to validate their investment thesis, Dillon says. "But that should not preclude you from including your perspective. Doing this the right way builds trust with investors."
Be Bold To Earn Investment Capital
Ask very blunt questions to get to a yes or no answer, Gibson said.
"It is OK, and encouraged, to ask an investor 'What else do you need from me to write a check?' " he said. "Investors can drag things out and wait for other investors to make the first move. Don't let them. A quick no is far better than months of no firm answer."
