A lot of entrepreneurs think that they need to be someone that they’re not in order to impress an investor. That is not a good idea and can backfire. First of all, people can usually sense when someone’s not being authentic. They may not be totally conscious of what is going on, but something will not feel right and they will not invest.
Second, you have a much better chance of attracting investors that are going to be a great fit for you if you’re really honest about who you are and what’s important to you. Just as lying on your online dating profile only leads to heartache when you end up attracting someone based on deception, the same holds true in the world of capital raising.
Don’t water down your message – show your passion! Be proud of what makes you unique and yes, maybe, a little different and quirky.
Very few people want to invest in something generic. Highlight what makes you, your company, and your product or service truly special and inspired.
Every entrepreneur I know that has successfully raised money has told me that this was the key to their success.
Your presentation should make it clear that you are passionate about your business. Passion is attractive because it demonstrates commitment – this is not something that you are going to give up on at the first sign of hardship!
Maybe there’s something about your personal story that led you to develop this business that makes you all the more passionate and committed. For example, I have a client whose children have multiple allergies. She became passionate about finding healthy foods for them and built her whole business around that. The story behind her business is really interesting and it adds to her credibility in the eyes of potential investors.
It is essential to make sure that your potential investors know that you have integrity, that you’re going to be a careful steward of their money, and that you’re going to always act with the highest ethics. These are attributes that are important to investors and somewhat rare in the world of business. You may take these things for granted, but you need to remember that they add value to your investment proposition and so should be emphasized in your presentation. If you can, share stories or examples of how important integrity is to you.
5. Willingness to Walk Away
As you go through the capital raising process, commit to yourself that you will walk away from a potential investor if the fit does not feel right. This can happen for many reasons. For example, you get a sense from the investor that he or she has a vision for the future of your business that is not consistent with yours. Or he or she is already pressuring you to lower your wages and stop paying one percent of your revenues to charity when those things are really important to you. Or maybe it’s just a gut feeling that you really don’t like this person.
Being prepared to walk away reduces that chances that you will end up with a horror story situation in which you lose control, get fired from your own business, your investor makes your life miserable, etc. I have heard lots of these stories and believe me, you don’t want them to happen to you!
Another benefit of being prepared to walk away and really owning that mindset is that potential investors will be far more attracted to your offer because they will sense that they have to work to be accepted into your inner circle.
Here is an exercise we recommend in order to make sure you get your fundraising done within a reasonable amount of time.
1. Imagine you have reached your fundraising goal. You are looking at the list of all your investors and how much each one invested. What is the lowest amount that someone invested and what is the highest amount? Try to create a clear picture in your mind of your investor list and the amounts invested.
2. In your imagination, scan the list and estimate what the average investment size per investor is. For example, you may picture that you’ll have some people come in at $5,000, some at $10,000, a few at $25,000, maybe one or two at $50,000, and one at $100,000. In that case, you may estimate the average per investor to be $20,000. You can use this tool to decide how much you’ll ask for from each potential investor: http://www.jennykassan.com/blog/7-steps-for-making-the-big-ask/
3. Now, take the total amount you want to raise and divide it by the average per investor. That will tell you the approximate number of investors you’ll have when you reach your goal. So, if you want to raise $400,000, you’ll end up with around 20 investors.
4. Multiply that number by 10. That is the approximate number of potential investors you’ll need to talk to about your offering. (This assumes that an average of one out of ten people you talk to will say yes—you may do much better than that, but it’s best to be conservative). In our example, this would be 200.
5. Divide that number by the number of weeks you would like to devote to reaching your funding goal. This is the number of people you will contact per week about investing. So, if you’d like to reach your goal within six months, divide 200 by 26 weeks—you need to contact 7-8 people per week.
6. Assume that for each contact you’ll need to spend 30-60 minutes on average. Multiply the number of people you’ll talk to per week by the average number of minutes you think each contact will take. That is the total number of hours you should schedule into your calendar for contacting potential investors. Add at least half that many hours to give yourself time to follow up with people who haven’t yet given you a definitive answer. In the example above, I would assume eight hours per week plus another four for follow up—so a total of 12 hours per week should be spent contacting potential investors.
7. Now block out that time in your calendar for the number of weeks you gave yourself to reach your goal.
If you use this method, you’ll keep your momentum going and get that fundraising done before you know it!
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