How to build momentum in a financing round by getting your data in order, polishing your pitch deck, researching investors, and starting early.
How to build momentum in a financing round by getting your data in order, polishing your pitch deck, researching investors, and starting early. It emphasizes the importance of understanding your numbers and constantly refining your pitch deck.
Hi, everyone. This is Alejandro Cremades, and today we’re going to be talking about how to build momentum in a financing round. Let’s face it; the sense of urgency, that fear of missing out is ultimately what pushes the investors to get in and invest in your business. Without that, when they see that the train is stuck, that the train is not leaving the station, it’s going to be very difficult for them to give you a check and to invest in your business. So, with that being said, let’s get into it. The first thing is to get your data in order before you’re even getting out there and speaking with investors, you want to really understand your numbers; your data around the competition, maybe there are some numbers on the competition; the data on your own market, the market size, how the market is growing. So you need to have all that data already in place in your head memorized because, for
sure, the investor is going to ask you about it. Now, here’s the tip: if you go into the meeting and there’s a certain question that the investor is asking you that you don’t understand or you don’t know, don’t make it up. Just say, “Thank you. If it’s okay, I’ll follow-up with you later.” Then after that meeting, later in the day, you send a thank you note, and you say, “By the way, to your question, here is the answer.” Never make it up; never lie because that’s all going to come out on the disclosure schedules when you do the due diligence, and that is going to be a reason for the investors to pull out of the deal. So, get your data and understand your numbers. The next thing is you need to constantly be polishing your pitch deck. A pitch deck is never a final and complete document. It’s always a work in progress. And by the way, you can download the pitch deck template below, which
you can get for free and that founders have used to raise millions all around the world. This pitch deck is going to be 15 to 20 slides. On every single meeting, there are going to be new things that are going to be popping up. Perhaps there are certain holes that you didn’t know were there. So, that’s why it’s key to listen because ultimately, those questions that you receive, let’s say, on meeting #5 or meeting #6, you’re going to see that are starting to repeat. That’s why you want to iterate and optimize your deck, and you want to continue to polish it as you go so that you can nail it for subsequent meetings when you’re speaking with other investors. You also want to do a ton of research either with investors that you’re already in discussions with or with investors that you’re about to have discussions with. For example, with the ones that you’ve already had discussions, you’re
doing your research, you have your Google news alerts when they do a new financing or anything else that could impact your own round or something that is an update on how well they’re doing. It’s a good way for you to stay on top and either send them a thank you or to use that information that you’re getting as a way to polish the way that you’re engaging with that investor. On the other end, with the new investors that you’re going to be reaching or that you’re going to be meeting with, you want to have done your research, or the articles that they’re tweeting about, the groups that they’ve joined on LinkedIn so that when you arrive on the call, you have done your homework. You know, even though you have never met that investor, you’ve already done the research to a point where it could be as you’ve known them all their life. If they’ve published a book, you want to read that book. If
they’ve done a ton of blog posts, you want to read the ones that have the most amount of popularity on the internet. You want to arrive at those meetings and also do those engagements with certain information that is going to give you an advantage and an edge toward everyone else in order to understand how you handle the communication. The next thing is, you want to know the investor. Obviously, at the beginning when you haven’t had that much of an exchange, one of the tactics that you can use is you can go out to founders that have already received an investment from that specific investor and not only use those to receive an introduction but also use those founders to ask them how the investor is. Maybe there are certain stories that they can share with you. Ultimately, those stories and that information that they give you is certain info that is going to help you understand if that’s
an investor that you want to have involved in your business; but then also, an investor that you want to handle or approach in a different way that you didn’t know you could. So that’s a good tool that you can use, founders of portfolio companies, and ideally, those founders that are working at a board level and that have a tight relationship with that investor that you’re looking to target. The next thing is, you want to start early. The biggest mistake that I find founders making is that they wait until the sixth-month mark when they are about to run out of money, and then they go out and try to find the investors. The problem is that time is of the essence – the more time, the more leverage that you have. What I would recommend that you do is, even if you’re not raising money today, you’re already building the relationship with that specific investor that you may be reaching out to in
the next 12 to 14 to 18 months, whatever that amount is. But you’re doing it ahead of time so that they get comfortable with you so that they get to know you, and also, they get to know your business. That way, when you actually meet them, it’s just one phone call away rather than having to start everything from the ground up. So, start early – as early as literally having an idea on a napkin. The next thing is taking commitments. There are going to be investors that are not going to be lead investors. Maybe it’s not that person or institution that’s coming in; it’s pricing the round for everyone else to come. One thing that you could do is, even with the people that you’re speaking with, you can ask them, “Would you be willing to make a commitment? Would you be willing to commit to making a certain amount of investment, and what would that be?” With that, you’re already creating some
type of storm, some type of snowball effect where you can leverage that potential commitment, especially if it’s a good name, a big name in the space that perhaps is signaling to others so that for further discussions, you can say, “By the way, (investor’s name) has already made a commitment of this amount, and we are going to move very quickly as soon as we get the lead investor. That’s a good way to get things kickstarted and to push them into that fear of missing out state, which is what is going to push investors to go over the edge. Then, you want to start low and go high. What this means is rather than, for example, if you need to raise $5 million, and you’re not sure if you’re going to be able to raise the $5 million, then you go for that amount that you know for sure, from the relationship that you already have, that they’re going to come in and they’re going to invest in the
business. For example, if you think that $2 million is going to be a for-sure amount that you can raise, go out and don’t say that you’re going for $5 million. Just say, “I’m going to be raising $2 million or maybe $2 million to $5 million,” that way, if you fall short and you don’t hit the $5 million, you’re not sending a negative signal to the market where people are going to be like, “Hold on. He or she didn’t raise that money. Perhaps there’s something off with this business. It’s all about signaling, and it’s going to give that psychological message to the market that you’ve reached your target very early and that you got the money that you need in order to execute and that you’re not falling short. Another great method to build momentum is to offer discounts. What this means is that if you see an investor that could be a very well-regarded investor or a popular investor, and
perhaps send a very positive signal to the market, one thing that you could do is offer them a convertible note with a certain amount of discount and interest on their investment if they were to help you in structuring the equity round later on. Maybe there is an equity round that is happening 3, 6, or 12 months, but for that investor, it makes total sense to jump in now so that they get to benefit from that discount, and they also help you in forming the entire round by making the right introductions, and then by guiding you to structuring it the right way. Next, you want to carefully use that moment when you announce who your lead investor is meaning who that investor that is coming in and investing 20% or more of your financing round because that is going to send a super powerful message to the market if it’s a well-regarded investor, or it may scare investors out if perhaps that
investor is…