There are a million articles on how to pitch a VC and negotiate a valuation. There are a million more on how to ask for funding from family and friends. Unfortunately, this is not how you start a fundraise.
The real work starts weeks in advance. Build up a network of investor prospects who know what you are doing and find it interesting. You start with those you know and those who are investing in startups. You craft a list with name, email, and phone number.
Every week you should be adding ten or more names to your investor prospect list. For those you know well, you can ask them for a call/coffee. If someone is unfamiliar, it’s best to give them an idea of what you are doing via email first. Then ask for permission to keep them informed of your progress. After one or two months they will have a good idea of what you are doing and how it’s going. At that point, you can ask for their interest in a call/coffee.
If you ask too soon in the process you may be met with puzzlement or flat out no. They can’t say yes until they understand the deal well and have some sense that there’s traction behind it.
There’s an old saying in the investment world, “If you want funding, ask for advice. If you want advice, ask for funding.”
Ask for advice, referrals to other investors, and general business assistance such as “who would be a good CFO?”
Keep in mind, this process takes several months (not weeks). Ultimately, it’s a numbers game and in order to find the 10% to 15% that will actually invest you have to meet a certain number of investors and keep them updated .
Just like sales, fundraising is a slow building process. It takes seven touches to close a sale, so it takes seven touches to close an investor.
Food for thought
It’s rare to hear an entrepreneur say the funding process went by faster than they thought it would. Universally, they say, it took longer than we thought.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies