How to find the right investors for your company

How to find the right investors for your company

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What are investors looking for?  It’s not what you think!

What are investors looking for? It’s not what you think!

I’ve been helping entrepreneurs raise capital for about ten years and have raised money for my own business three times.  I also talk a lot to investors.  I have learned that investors are looking for a lot more than a good financial return.  Here is a list of some of the main things investors consider when trying to decide where to park their money:

  • Trustworthy, high-integrity leadership – generally, investors feel a lot more comfortable investing when they sense that the entrepreneurs or fund managers they are entrusting their money with will be responsible stewards
  • Reasonable level of risk – this is very much related to the first one – if investors trust an entrepreneur, they will perceive the risk of the investment to be lower; perceived risk may also be lower when the investor has a direct relationship with the business e.g. as a customer or supplier
  • Transparency – many investors are frustrated with the complexity and opacity of Wall Street investing – they value being able to understand where there money is going and what it is being used for
  • Being part of a community or tribe – when companies treat their investors as more than just a source of funding, but as a supportive, cohesive community, this can create a lot of investor value (I invested in a fund recently that actually provides zero financial return on investment, but gives me access to a community that I love)
  • Being able to tell their friends and acquaintances about the cool thing they invested in – studies have shown that this is a big driver of investor decisions!
  • Values alignment – a majority of investors state in surveys that it is important to them that their investments align with their values
  • Cool perks – invitations to special VIP events, trips, discounts, sample boxes, etc. can add a lot of value for investors – I recently read an article about how much Estee Lauder’s shareholders love to be pampered and get goody bags at the annual shareholder meeting!
  • Low to no fees – many investments involve middlemen and fees – opportunities to invest directly in a company allow investors to avoid those nasty fees

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Why do people assume your business is a nonprofit?

Why do people assume your business is a nonprofit?

I have a client that I’ve been helping to raise money from investors.  It is a for-profit corporation that is successful and profitable.  I am not exaggerating when I say that at least half of the people that I tell about this business assume it is a nonprofit.  The CEO of this company has told me that a lot of people she talks to assume her company is a nonprofit.  People don’t even ask if it is a for-profit or a nonprofit – they say, “oh, how can it raise money from investors given that it is a nonprofit?”

I have no idea why this is!  Here are some possible reasons:

  1. The CEO is an African American lesbian and when people picture a for-profit business owner they don’t picture someone that looks like her.
  2. The company is highly mission-driven and working in a space that many nonprofits work in as well.
  3. Because I am a woman, people assume that my clients must be nonprofits (because a lot of people associate women with nonprofits rather than for-profits).

Has anyone ever assumed your for-profit business was a nonprofit?  This has actually happened to many of my clients that are led by women.

I should mention that the people who assume these businesses are nonprofits are just as likely to be women as men.

What do you think this is about?!?!?

Please note that I don’t believe there is anything wrong with being a nonprofit and I have helped several nonprofits raise money from investors.

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5 Unconventional Tips for Talking to Investors

5 Unconventional Tips for Talking to Investors

1. Start the conversation by asking questions like

What’s important to you when making an investment?

What’s frustrating to you about the investment opportunities that are available?

2. Really listen!  Imagine what it feels like to be them. Do a lot more listening than talking.

3. Show empathy – almost everyone has pain and frustration about money.

4. Next, ONLY if it feels like a good fit, share your passion and vision, authentically and from the heart.

5. If the investor seems to be intrigued by the vision you shared, only then provide the nitty gritty details – your company’s milestones achieved, your plans for growth, how much you’re raising, etc.

BONUS TIP: Enjoy the process!

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What stage of business is the right time to raise money?

What stage of business is the right time to raise money?

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I Can’t Keep Silent about this Anymore: Women and Capital Raising

I Can’t Keep Silent about this Anymore: Women and Capital Raising

I started helping mission-driven entrepreneurs raise capital almost ten years ago.  My clients have collectively raised almost $20 million, with amounts ranging from $150,000 to $4 million.

About two years ago, I was compiling a list of the clients that I had helped to raise money.  At that time, I could honestly say that every client that I had worked through the whole process with (i.e. if I excluded those that changed their minds and didn’t complete the process) had met their fundraising goals.  Some took longer than others, but all of them had eventually reached their goals.

Looking at the list, I noticed something strange: almost all of my clients were companies led by men.

I decided I wanted to start focusing on helping women entrepreneurs raise capital.  So that is what I have been doing for the last two years.  And here is the dirty little secret that I don’t like to talk about: I am not seeing the same success rate that I saw with my male clients.

Yes, some of my female clients are raising money, but I am seeing them take longer and struggle more than my male clients.

What is going on?  I have done some research, as well as paid attention to what women entrepreneurs say about raising money.  I’ve also reflected on my own experience raising money from investors three times in the last five years.  Here are a few data points that are consistent with my observations:

  • Men in the United States are about 25% more confident than women in their capability to start a business.[1]
  • Men apply for a job when they meet only 60% of the qualifications, but women apply only if they meet 100% of them.[2]
  • Women are 70% more likely to say “I didn’t want to put myself out there if I was likely to fail.”[3]
  • Investors prefer pitches presented by male entrepreneurs compared with pitches made by female entrepreneurs, even when the content of the pitch is the same.[4]

Based on my own experience and talking to hundreds of women entrepreneurs, I think all of these phenomena contribute to the problem.  Women entrepreneurs have less confidence about asking for money, feel they have to have a perfect business before they can ask, and would rather not ask if they think they will get a no.  To make matters worse, when they do ask, the deck is stacked against them because of gender bias.

Another problem is that the fundraising strategy that gets the most hype is the Silicon Valley model which requires super-fast growth at all costs, which just doesn’t fit what many women entrepreneurs want for their businesses and their lives.  They often don’t know that there are many ways to raise capital.

I am really tired of seeing women having to work harder to raise money!

So I am partnering with Amrita Sankar of ImpactAssets to do more in-depth research about what factors contribute to the funding gap that women face and what kinds of interventions are the most effective for helping women achieve their fundraising goals in a way that allows them to stay in alignment with their values.

Please stay tuned over the next few months to hear more about our findings.

[1] Global Entrepreneurship Monitor 2015 U.S. Report, Babson College

[2] Hewlett Packard report.

[3] “Why Women Don’t Apply for Jobs Unless They’re 100% Qualified” by Tara Mohr, Harvard Business Review, Aug. 25, 2014

[4] “Investors prefer entrepreneurial ventures pitched by attractive men” by Brooks et al., PNAS, March 25, 2014; available at http://www.pnas.org/content/111/12/4427.full.pdf

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