7 Steps for Making the Big Ask

7 Steps for Making the Big Ask

So, you have your investment offering ready, and you’re preparing to go out and start talking to investors.  One of the biggest questions I get from my clients is how do I know how much to ask for when I talk to a potential investor?  Here is a system you can use to get ready to make the right-sized ask.

  1. Decide on your ideal number of investors which will depend on the legal compliance strategy you’ve chosen.  If you’re doing a private offering, there may be legal limits on how many investors you can have.  Typically with a private offering, you would not have more than 25 investors. If you’re doing a public offering, you may end up with 100 or more investors.  Don’t be afraid of having “too many” investors—a larger number of small investors makes it easier to reach your goal without having to give up control.
  2. Take your total target raise and divide it by your ideal number of investors.  So, for example, if you want to raise $500,000 and your ideal number of investors is 25, the average amount per investor is $20,000.
  3. Now, (at least) double the number you arrived at in Step 2.
  4. Decide on the minimum investment you will accept—in the example above, maybe your minimum is $10,000.
  5. Picture yourself meeting with a specific person you plan to ask for investment and imagine asking for the amount you calculated in Step 3.  What thoughts come up? Do you find yourself thinking, “Oh my gosh! That is way too much—they will never go for that?” If so, good! You are in what Dia Bondi of AskLikeanAuctioneer.com calls the Zone of Freaking Out (ZOFO).  If the number you’re asking for doesn’t freak you out, increase it until you feel freaked out. When your inner voice tells you you can’t possibly ask for that amount, you know you have arrived at the right number!
  6. When you’re in a meeting with a potential investor, make your ask and then be quiet.  Give your potential investors time to think. Do not say anything—wait for a response.  If they say no, you can reduce your ask (in small increments) down to the minimum you decided on.
  7. Know that you should not make an ask that does not put you in the Zone of Freaking Out.  Then practice increasing the amount that puts you in the ZOFO. The first time I raised money, I freaked out over asking for $1,000.  Now I freak out over asking for $100,000. The more you practice asking for an amount that you think you can’t possibly ask for, the more you will learn that it is actually possible!

We would love to help you with your big ask.  Click here to schedule a strategy session now!

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Stop Bootstrapping, Stop Leaning In, and Organize

Stop Bootstrapping, Stop Leaning In, and Organize

It used to be that only men were called entrepreneurs.1 But women have been entrepreneurs for a long time.2 We have opened and run businesses out of necessity, passion, and genius. We’ve had to do it while caring for children and prior to having the right to vote. We started businesses back when we could not take out a loan without a man, and we are still starting businesses while earning 80% of what men earn.3 Maybe we weren’t called entrepreneurs, but we were doing it anyway: because we needed to, because we cared, because we knew we had it in us, or because our ideas were just too good.

Today, more and more women are launching businesses4—and this is good for everyone. As of 2017, woman-led enterprises employed nearly nine million people in the US.5 One international survey found that women are more likely to engage in entrepreneurship that has an environmental or social mission.6 More than one study has indicated that women-led businesses produce greater returns for investors.7

But, somehow, women are getting way less investment funding than men. Way less! In 2018, only 2.3% of venture capital investments went to female-founded startups.8 This isn’t necessarily because women aren’t trying (as some people claim). It turns out (surprise) that more than 90% of investment partners in venture capital firms are men,9 and (you guessed it), men prefer to invest in other men.10 One research team believes this is due to “outright sexism (explicit or implicit) [or] more subtle things, such as a desire by male investors to mentor founders who remind them of themselves.”11 Another study concluded that “[w]omen do face bias in terms of the masculine stereotype held by the majority of the male dominated investment community: during the pitch, women should ‘act’ like men and indicate masculine behaviors or they may be penalized by investor audiences for not having the qualities they believe to be consistent with entrepreneurship.”12 By contrast, according to a TechCrunch report, “[t]here is clear evidence . . . that the small number of venture firms with female founders and/or an unusually high percentage of female partners invest at elevated levels in female entrepreneurs.”13

It’s possible that adding more women to the VC mix could help balance things out.14 But maybe, for those of us who want to build a new economy, this is not the best use of our energy. As Jenny pointed out last month, the VC model is designed to enrich a few wealthy people, and it perpetuates inequality regardless of the identity of the founders that get funded.

And anyway, until the VCs include more women, assuming that will help, what are women entrepreneurs going to do? They can (a) struggle in silence and bootstrap their businesses (find out what that is and why it’s a problem here); (b) try to act more like men and lean in at meetings with VCs (which might not help much according to Michelle Obama and a bunch of other people);15 or (c) they can get off those treadmills, organize for their common goals, and do something more productive.

Women, let’s (c), get organized. Why wait for male VCs to finally decide we are worthy? We—and our mothers and grandmothers—didn’t wait for anyone to tell us we could be entrepreneurs.

Here are some suggestions. Business owners or not, we can:

  1. Invest in women-owned businesses that share our values. Investment crowdfunding platforms are a great place to start. They are easy to browse, and anyone—regardless of wealth—is allowed to invest at least something (there is a weird sliding scale based on income and net worth that you should know about). Check out these female-led, mission-driven companies on Crowdfund Mainstreet.
  2. Join investor communities that prioritize women-owned businesses. Angels of Main Street is open to everyone and is a place to learn about investing in mission-driven enterprises and be introduced to companies currently raising capital, including many led by women.
  3. Tell other women to do (1) and (2).

Are you a woman entrepreneur focused on raising capital for your business? Do you want to connect with legal and capital-raising experts and join a mastermind group of like-minded, badass female founders? Please join us at our July 2019 Retreat—Be A Money Magnet—to step into your power and get the RIGHT funding for your business.

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FAQ:  How can I get funded without giving up too much of my business?

FAQ: How can I get funded without giving up too much of my business?

In a recent virtual training, I asked participants to submit their top questions about raising funding from investors.  Below is one of the most commonly asked questions.

How can I get funded without giving up too much of my business?

Many business owners think that if they raise money from investors, they will have to give up a big chunk of ownership and maybe even control of their company.

This is a myth! It is absolutely possible to raise money from investors without giving up any ownership at all or giving up an ownership percentage that you feel comfortable with.

The reason this is possible is that the return on the investment you offer does not have to be tied to ownership of your company. If the only way an investor can ever get any return is via the sale of your company, then yes, investors will want as big a chunk of ownership as possible. But there are lots of other ways for investors to get paid.

The key is to carefully design your investment offering so that it fits with your goals, values, and plans. If you need help designing your offering, please sign up for a complementary financing strategy session. 

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Will it turn investors off if you tell them about your mission?

Will it turn investors off if you tell them about your mission?

I’ve talked to many entrepreneurs who have told me they deemphasize the mission of their business when talking to investors.  They assume that investors care most about financial returns, and they worry that talking about their mission could get in the way of getting funding.

This is a terrible idea!  Most investors actually want very much to invest in mission-driven businesses that are values-aligned.  If your mission is important to you, you need to say it loud and proud. Furthermore, any investor who does not like the fact that your company is mission-driven is not a good fit for you, and you should not waste time with them.

More and more investors are coming to understand that, in the long run, mission-driven businesses are likely to be more profitable and successful.  When talking to potential investors, if you sense a lack of values alignment, it’s best to move on. Always seek out investors who are focused on your business’ long-term success, not on making a quick buck.

If you stay true to what matters most, you can and will find investors who share your vision and want to support you on your terms.

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Do you have to give up control of your company if you raise capital?

Do you have to give up control of your company if you raise capital?

So many of us have heard horror stories of founders giving up control to investors and then being pushed to do things with their business they didn’t want to do or even getting fired from their own company!  

The good news is that it is absolutely possible to raise money AND maintain control of your business.  I’ve been helping clients raise money for over 10 years, and I have never had a client who gave up control to investors!

Every business and business owner is unique — ideally, investment terms should be tailored to each situation. Unfortunately, most lawyers and finance professionals are unwilling or unable to be creative.  

You live and breathe your business, and you have a vision of what the business will look like when it has reached its ideal size and level of impact. This vision is what should inform the terms on which you accept investment. If you accept terms that are dictated by an investor, you risk sacrificing your vision, goals, and values in the name of complying with whatever the legal documents dictate.

If you structure the investment offering in a way that reflects what you value most, you will attract investors who support you, believe in your vision, and trust you to lead the business in a healthy and sustainable direction—all while YOU maintain control of YOUR business.

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Three things to do before you talk to investors – Part 1

Three things to do before you talk to investors – Part 1

Too many entrepreneurs jump right into raising money before taking these three important steps.  This is the main reason for the horror stories you hear about entrepreneurs whose investors are making them miserable.  Do these three things BEFORE having any conversations with investors to save time and lots of potential future headaches.

This post talks about the first thing: Get clear on your goals, values, and non-negotiables.

Goals include

  • How many hours per week you want to work
  • How much vacation you want to take
  • What salary you want to pay yourself
  • How big you want your company to grow
  • How quickly you want your company to grow
  • How long you want to run your company
  • What you want to have happen with your company when you’re ready to leave it
  • How you want your company to impact the world
  • How much control you want over major decisions

Values include

  • How you want your employees to be treated
  • How you want your suppliers to be treated
  • Quality standards for your product or service
  • Standards related to your contractors (e.g., would you contract with a manufacturer that has been fined by the EPA for polluting?)
  • What effect you want your business to have on the environment (e.g., air quality, production of waste, carbon footprint)
  • What effect you want your business to have on the communities where it does business
  • Your view of the importance of transparency—e.g., whether you want to share detailed information about your company with your employees, investors, and maybe even the general public

Which of these are so important to you that they are non-negotiable?  Picture an investor walking up to you and offering a check for a million dollars. What conditions would make you refuse the check?

Of course, your goals and values can change over time as your company evolves. But the clearer you are now about what is important to you, the easier it will be for you to make sure that the way you raise money is in service to those goals and values.

To learn more, check out Raise Capital on Your Own Terms.

Want to learn from Jenny live?  Come to Fund and Fuel Your Dreams in Oakland March 8-10.

 

 

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