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Raising Capital – Developing the Right Rolodex/Contact List 

Mindy Barker | Barker Associates

Finding the right investor, who is interested in your company and you, begins long before you actually may need money. Preparations include thinking about businesses that investors want to invest in and then modeling yours accordingly, maintaining up to date financial data, and building a strong consumer base. Once you’ve made the decision to search for capital to grow your business, you create two pitch decks (yes two), and the clock is now ticking. Your goal should be to secure funding within three months from making this decision. And the best way to do so is to have targeted contact list. 

First, Some Introspection 

Before you can ask anyone for money, you should first ask yourself some important questions. First and foremost, why are you raising money? Be very clear as to why you are doing so, why now is the time, and what the funds will ultimately do for your business. These answers should be weaved into the fabric of your business’s story and included in your decks and any accompanying materials you may present to potential investors.  

You should also do a check on your core values. Are they aligned with the company’s vision and mission? Are they still as relevant as when you developed them? Are changes needed? Only when you are confident in what you stand for can you try to find someone who shares …  

Who Should be on the List? 

Your targeted list may include any combination of some or all of the following: family and friends, angel investors, angel groups, venture capital firms, private equity firms, and corporate investors. 

Gather data by performing research on Crunchbase or Pitchbook, and simply networking with others. You should identify vertical industries to see what is happening there. Startup accelerators are also an invaluable resource. Follow groups on social media to see what they’re talking about and what they’re interested in. 

Keep in mind that you are not just looking for money. You are looking for someone (or a group) who shares your values, will be excited about what you offer, and who fits with what you do and who you are. Identify who has money and is actively investing. 

Factors to Consider in Building Your Contact List  

  • Industry. Who is investing in your industry? Why? Is there some personal connection or is it just about the potential profit? Note that those interested in one particular type of industry often have a background, experience, and connections that can help your business. 
  • Location. Some investors want to be close to the businesses they are investing in. Others give preference to local startups. It’s important to understand if this is a priority for them.
  • Amount. How much do they typically invest? Some may invest only smaller amounts than what you are looking for, whereas others may invest amounts that are larger that what you need. Ensure there is a good fit.  
  • Longevity. Are they looking for long-term or short-term relationships? Will they be involved for your next round of fundraising or will they want out before then? 
  • Track record. How many successful exits do they have? How many businesses they’ve invested in have failed? 
  • Value. What value do they bring? Investments into a venture are rarely just about money. Do they have operational experience? Industry experience? What are their connections and network? Will they provide advice based on their knowledge and experience? All of this will factor into how quickly you scale.  

This process is about targeting the right types of investors, focusing on quality over quantity. You want the best fit to bring the most value. As is with much in business, and life, it is about networking and cultivating relationships. 

Once you’ve identified some strong potential investors, gather as much contact information as possible, including email, social media accounts, website, phone number, and address. Understand that they will want to see your pitch deck to determine if it is a good fit with their investment thesis before moving forward. Being prepared sets the right expectations from the start. 

Your list should be an ongoing concern. Contacts will fall off and new ones will be added. By keeping it up to date, you can ensure that you will be ready for each round of funding in the future. 

Your most limited resource is your time. And the time you spend finding investors is less time you have to focus on operations, marketing, or sales. Protect that time fiercely by targeting the right investors from the start. With increased focus comes increased efficiency and clarity on what and who you really need. You may need to talk to 100 or more contacts to get some interest, but you don’t want it to be thousands. That’s where your targeted list comes into play. So you’re not spending too much time and energy and burning out before the right person comes along.  

Ultimately, if you need money for your business, you need people to pitch to and the more targeted your list, the more possible yeses you’ll have, and the greater ROI on your time. 

Start With Simple

What do making your bed and pitching to potential investors have in common? According to Admiral William McRaven, in his book, Make Your Bed (available at Amazon.com), it’s the simple steps, taken each day, that achieve great results.

To better link these two seemingly unrelated activities, consider this: Chief Executive and Financial Officers may feel overwhelmed by the need to focus on daily tasks and raising capital.  But by executing a simple task, such as making your bed each day, the tone is set for the rest of the day’s attitude and accomplishments.

Combine the responsibilities of a C level position with the priorities of kicking off a new year, and CEOs and CFOs may lack the required focus to also prepare to meet with potential investors. I suggest you personally implement one to two simple habits successfully, then move on to other new habits. The success of achieving even simple changes will reinforce your mindset for success.

Can Your Investor Become Your Trusted Advisor?

Last October I offered advice on finding the right investor for entrepreneurial businesses. Today I am writing about trusted advisors (the theme for March) – the investor is a special kind of trusted advisor.

 

As with any business relationship, finding the right fit with your investor is the first step in a long and successful association. This may sound like dating advice, as there are many similarities. For example, identifying potential investors through word-of-mouth or introductions from mutual friends has a better chance of success than selecting the first name your search engine delivers.

But don’t stop there, ask your acquaintance why they recommend this or that one. Understanding your goals is critical with whomever you choose to ask for money.

 

With potential candidates on your list, think of a few “speed dating” questions to narrow it down. You should know yourself well enough to already know which questions/answers are deal-breakers. What do I mean by that? Let’s say you want a silent investor who is hands-off.  Ask how they work with their current clients – hands-on, hands-off or somewhere in the middle.

 

Other filtering questions might include:  who are some of their other clients (besides your referring friend); are they local; in which industries do they specialize? Are they a solo investor or in a group? What type of client do they prefer – are you that client?

By doing your due diligence you have reduced the risk of having to break up with your new investor sooner than planned.

 

One of your goals in securing an investor should be that once they have reached their goal with your business, they stick around as your #trustedadvisor. You just may need them again when your successful business is ready to rise to the next level of success!

 

Building trust takes time and an investment from both parties. At the end of a successful pitch to gain an investor, the trust clock with that investor starts ticking.  You both must deliver now on the promises made during the courtship; nothing builds trust quicker than doing what you said you would do. And when you follow through, the role of trusted advisor just naturally evolves.

 

At Mindy Barker & Associates we help entrepreneurial businesses prepare for meeting with investors to pitch their business and obtain funding. If you think you need an investor, but don’t know where to start, contact me at cfo@mindybarkerassociates.com to set up a no-obligation 30 minute discovery call to discuss how we can help.

 

My final word of advice: this process should begin the minute you start a business – not when you need the money.  If you are trying to raise money at a time you are getting ready to lose money – you lose leverage.