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.
- 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.
- 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.
- Now, (at least) double the number you arrived at in Step 2.
- 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!
- Decide on the minimum investment you will accept—in the example above, maybe your minimum is $10,000.
- 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.
- 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!
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