July 14, 2011
To angel and venture capital investors, companies seeking capital are driving buses on which the investor is hopping on for the ride. These companies are vehicles that investors hope will take them from point A (the investment) to point B (10X returns). Experience tells investors that the odds are against ever getting to point B and they are more likely to wind up at point C (broke).
As a startup executive seeking funding, you may think that you're the best darn bus driver with the coolest bus, complete with a souped up engine and spiffy paint job, and that may very well be true. But to investors looking for a ride, you're still just a bus that is probably not going to get them to their desired destination.
To make matters worse, you're not the only bus in town. In fact there are thousands of buses. Heck there are more buses than there are riders, and, if as an investor I miss your bus, that doesn't bother me one bit because there will be another pretty darn good bus with another sharp driver and a hot turbo-charged, nitrogen-fed engine and custom paint job coming to my stop in just a few minutes.
So what does that mean for your money raising strategy? It means you need to un-entrepreneur yourself. By that I mean you need to actually apply some discipline, do some planning and follow a few – Oh no! He's going to say the R word – Rules like:
- Are You Ready To Leave The Bus Depot? – If you start too early, you're going to run out of gas. There's nothing worse than a stale deal. If you begin your money raising campaign before you're ready, or before it's realistic to receive a term sheet, you're going to smell like 7 day old fish by the time you have a functional product, customers, revenue, and fully fleshed out team, which is when you're actually ready for funding. The last thing you want when you're raising money is for someone to say, “They've been out there pushing that bus for 18 months. There must be a some hair on that deal or they would be funded by now.”
- Try To Be A Limo Instead of a Bus – Buses pick up people hanging at the bus stop, while limos pick up people who have called and arranged the ride. How can you get your prospective investor to invite you to a meeting? To call you for a ride? Who do you know who can whisper in their ear? Be the pretty girl at the dance. When a guy asks a girl to dance, she's a 10. When the same girl asks the same guy to dance, she's automatically downgraded to an 8. Make yourself a limo instead of a bus. Be a 10.
- Have You Planned Your Route? – Every investor is different. They invest in different sectors, different stages, different regions. They have different hot buttons. Do you know enough about the potential investor to tailor a specific pitch just for them, or are you playing “spray and pray” (throwing crap up against the wall and hoping some of it sticks)? Get to know your audience and prepare a presentation specifically for them. Pretend you only get one shot. Because you only have to screw things up once. You only have one shot.
- Look Like A Crowded, Popular Bus – I know this is difficult to believe, but angels and VCs are actually people, and neuroscience tells us that fear of loss is s stronger motivator to people than the possibility of gain. The reason McDonald's advertises billions of hamburgers sold is to let people know that billions of people have eaten their hamburgers. If you stopped off an interstate in a small town with no wireless connections and you couldn't check Yelp ratings, would you eat at a McDonald's with the billions served sign, or would you stop at a diner that had no cars parked in its parking lot? Investors hate to be out there on their own, all alone holding the bag, looking dumb when the wheels come off the bus. Try and get potential investors together so they feel like they're not alone in believing in you and your dream bus.
Now go out there and drive safely!
Editors Note: You can find more tips on raising money at Glen's Venture Capital Cookbook Series on his blog, Forward Thinking.
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