When you've seen hundreds of pitches, presentations, and business plans, you recognize clear patterns for those that rise to the top and, ultimately, get funding. There is a certain profile to which a company raising capital should aspire to get the attention of an investor.
In a way, it is a little bit like dating. It seems so simple, but if you’ve ever dated, you know that it is quite the contrary. Finding a perfect mutual match is the key to success. And as such, entrepreneurs should have done quite a bit of research on potential investment firms before reaching out to any of them.
Which ones seem like the best fit for your business? Are they firms that were recommended to you through your network? Will you opt with a local investor to take full advantage of the perks associated with doing so? Once you’ve eyed the firms to which you’re attracted, how do you get them to eye you, too?
Following are three tips to help you stand out.
Be Connected and Informed.
Building a network is an art and takes great skill. Networking is about representing the brand and leaving your ego at the door. Work your network -- it is one of the most powerful tools you have, and a warm referral is the best way in to an investor. Ask your service providers, lawyers, accountants, tax professionals, bankers, and peers for referrals to investors matching your size and capital needs.
We recently covered the importance of "the referral" and it is worth noting just how important one is to an investor as it gives them multiple points of reference on a company in a single action. (Read more about getting the right referral here.)
Once you have that referral, and the investor’s interest has been piqued, what's next?
Always start out asking the potential investor for advice. Do not ask them for funding up front. Find out from them, in their own words, when and in what types of companies they invest. This is a natural; no one likes to be forced into an instant decision, yet if you lead with money talk, you are putting the investor in that forced position.
Do your homework and have some solid questions ready for investors. What fund are they investing from? How large is it? When did they start investing from that fund? What is their preferred deal size? You get the picture.
Be Prepared and Concise.
Even with a warm introduction, you will need the elements of a great story to tell. Why you? Why now? Why is your solution the best?
A story is preferred over a list of facts and figures, but be crisp and be interesting. It's always great to hear that you have some customers, but please tell me about how you landed the first $2-3 million of revenue and how/why these customers are renewing. Next, explain how that grew to $5-6 million.
Follow that up with a story about your current growth and state of the business. How did your team come together? Where did you find your co-founder(s) and initial market? How large are you now, and how did you attract your current customer base? Why and when are they renewing (if you are a subscription based business model)? How large is your sales team today? What is their average tenure with your company?
Paint a picture of a team that is scaling up. The transition from executive or founder led selling to sales team execution is one that we look at closely in all our companies and we work hard to help executive teams super-charge growth with great talent as they hire.
Again, the more you are able to use concise stories, and the better prepared you are, the better the understanding from your audience. How big can this business ultimately be? What will you do to further fuel your journey when you do raise capital?
Be Differentiated and In Touch.
Investors are also keen to hear about the big problem you are solving for your customers. What is the "pain point" and how does your solution solve it? I have heard others describe this as a "must have" versus a "nice to have" solution. It’s all about a key differentiator and showing that you have built a great product and a great team and that you’re on the trajectory to scale.
When you have figured out how to scale, and you have an idea of how much you want to raise, then go ahead and get your story out to the potential funders and don’t forget to keep them updated.
Plan to keep in touch on a regular basis. If you can do something regular (quarterly or every 4-6 months), that is ideal. Investors want to hear about new product developments, the latest wins and challenges, and at the right time you'll find you will be a great fit for a particular investor. This will enable them to build a picture over time and then really dig in when there is a good match.
All in all, if you want to get noticed, be sure to identify the right investor for your stage of company, and try your best to get a referral from a trusted source. Then tell your story, tell it early, and get feedback on the fund raising process well before you need money for expansion. This will allow you to get to know your investor and vice versa.
To make it out on top, scale should be top of mind. Know how much you want to invest for growth, and come with your own questions for your likely investor. Follow these savvy tips and you’ll be sure to stand out.