Raising money to fund your start-up, especially if it’s your first time, can be downright scary. How do I find investors? How do I convince them to consider my idea? More importantly, how do I convince them to write a check? This can all be a bit daunting, so let’s describe the process using an analogy to an equally daunting process most anyone can relate to: dating. Whether you’re a dating pro or you can’t get a number to save your life, you know more or less how dating should work, right?
Step 1: The Intro
First, you need to get in front of the investor in some way, whatever way you can. Think back to college or whenever dating was something that occupied a lot of your time. When you really (really!) wanted to meet so and so, you probably did one of two things. You either convinced one of your mutual buddies to introduce you….or you stalked.
If you have a mutual buddy, getting introduced is the way to go. This is also true when raising money, especially if it’s venture capital you’re interested in. A typical vc receives more pitch decks and business plans than he or she can actually go through in detail. The main way to get to the top of the queue is by way of introduction by someone the vc respects or at least knows. Think about the pile of pitch decks sitting in a vc’s inbox. Do you think he or she will start with the ones received via cold call or start with the one their former colleague or friend emailed over with a note saying, “You should check this out. I know this girl, and she’s wicked smart?” So if one of your former professors or your mountain biking buddy – heck I don’t care if it’s your orthodontist – knows a vc you want to talk to, hit them up for an intro.
If you’ve scoured your personal network, including LinkedIn and Facebook, and you can’t get a good intro, move on to plan B: stalking. Of course, I mean stalking in the non-criminal, non-creeper sort of way. Back to dating, if you didn’t have a mutual buddy who could introduce you, your best bet was to hang out where your crush hangs out. If you first saw your crush at the gym, you suddenly felt the need to work out six days a week. If your crush was a barista, you suddenly became a coffee addict with a new fave coffee shop. It’s pretty simple. So back to raising money. If you can’t get an intro, stalk the investors by hanging out where they hang out. Look up events that might be of interest to an investor, events showcasing other start-ups or events that feature investors as speakers.
Step 2: The Pick-Up Line/ Breaking The Ice
Once you get in front of your crush, your method of striking up a conversation really depends on your personality. Do you walk up and say, “How you doin’?” or “Can I buy you coffee some time?” or “Excuse me, do you know how much a zamboni weighs? Enough to break the ice!” That’s up to you. When introducing yourself to an investor, you can do it however you want, but ideally, you have an “elevator pitch” ready, a concise way to describe your start-up in sixty seconds or less. All you want to do at this point is get the investor’s interest, just like a pick-up line in dating, so that he or she is willing to set up a meeting after you email your pitch deck. Make sure to ask for a business card so you can send that email.
Step 3: First Date
If you get in front of an investor through an intro or by stalking, and you successfully piqued their interest, your next step will be to set up a pitch meeting, equivalent to a first date in our analogy. The meeting will be about an hour long, and it is your chance to make a great impression and tell your story. The investor will not know everything there is to know about your company or your idea after this meeting, but ideally, he or she will be excited to learn more, just like a great first date. Take a look at this handy list written by Bill Bice for tips on how to put together a solid pitch deck.
Step 4: Dating
If the first date, a.k.a. the pitch, goes well, you’ve now started a relationship with the investor, and he or she will start thinking about various aspects of your company and your ideas. He or she will call or email you to ask questions, and this is a good time for you to get to know the investor as well. Think about if you really want this particular investor to make an investment in your company, and therefore become a part of your life for a significant amount of time.
Step 5: Put A Ring On It
If the “dating” part goes well, and the timing is right for both parties, the investor may decide they want to go ahead and invest. So the due diligence process will begin, and this is when things get serious, kind of like when one takes the plunge to get engaged. You still have the chance to back out, or not show up to the alter, but you’re pretty likely to seal the deal some time soon.
Step 6: Getting Hitched
If due diligence pans out, and you go through with the investment, then first of all, congrats! You raised some money for your company, and now you can get back to spending most of your time working on your business! Hopefully, you picked a good investor because you’ve signed on to spend a lot of time together. If the investor is a vc, they will probably want a board seat, and you’ll owe them information and detailed updates at least once a month if not weekly. Before you commit to an investor, make sure the individual or the firm brings something other than cash to the table. Make sure they have ways to help your company, be it help with industry connections, follow-on fundraising, strategy, adding to your team, or positioning your company. Just like in dating, it’s best to make sure you like spending a lot of time together before you get to this stage because, for better or for worse, they become a part of your team and your life, and hopefully that’s a good thing.