By Glen Hellman
To investors, a company seeking capital is like a bus offering a ride. Investors hope that the bus ride will take them from point A (the investment) to point B (big returns). But experience tells investors that the odds are against ever getting to point B; they’re more likely to wind up at point C (broke).
As a start-up executive seeking funding, you might 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 an investor misses your bus, he or she knows that another pretty darn good bus with another sharp driver and a hot turbo-charged, nitrogen-fed engine and custom paint job will be coming along 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.
Here are 4 rules for a money-raising strategy:
1. 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 seven-day-old fish by the time you have a functional product, customers, revenue, and a 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 some hair on that deal or they would be funded by now.”
2. Be a Limo Instead of a Bus.
Buses pick up people waiting 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: Entice them to approach you, and increase your allure dramatically.
3. Have You Planned Your Route?
Every investor is different, focusing on different sectors, different stages, different regions. Each has different hot buttons. Do you know enough about the potential investor to tailor a specific pitch, 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.
4. Be a Crowded, Popular Bus.
I know this is hard 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 burgers without dying of food poisoning.
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!
Glen Hellman is an angel investor, serial entrepreneur, and has worked for venture capitalists as a turn-around specialist. He’s a principal at Driven Forward, board member at The University of Maryland’s Dingman Center for Entrepreneurship, a Vistage coach and a mentor at the Founder Institute. You can e-mail Hellman at firstname.lastname@example.org.
Originally published: Oct 31, 2011