This video explains that fundraising is a numbers game and how to handle rejection from investors. It discusses strategies for when investor outreach isn't working as planned.
What this video covers
Let’s face it. Raising capital is an art. It’s not easy getting out there, sticking your neck out, dealing with those investors, trying to figure out the strategy, and figuring out things that are working and things that may not be working. Then, all of a sudden, you’re at a frustration point. Today, we’re going to be really breaking it down for you. We’re going to be walking you step-by-step to what to do in the event that things are not working as planned. So, with that being said, let’s get into it.
Remember that fundraising and, more specifically, the outreach is all a numbers game. If you’ve listened to my podcast, the DealMakers Podcast, where I interview some of the most successful entrepreneurs in the venture world today, you’ll see that many of them were rejected by hundreds and hundreds of investors until they got a yes. In many instances, it could be even as low as 1% response rate. It could be good, depending on the segment that you’re in.
Also, what you’re going to be seeing, and a lot of people talk about this, people like Adeo Ressi from Founder Institute and other folks say that it typically takes at least 100 noes to get to one single yes. Again, it’s a numbers game, so the more people that you have at the top of the funnel ultimately, the more people that may end up saying yes at the bottom of the funnel. That’s why you want to have as many people as you can target as possible.
You need to follow-up, follow-up, and follow-up. You are never going to get an investment they want. I have never seen an entrepreneur that goes and pitches an investor the first day they meet, and then right away, they get a check. That doesn’t happen. Essentially, this is like sales. You’re never going to get your sale on day one. You need to follow-up; you need to really understand the concerns of that investor or like we were saying in sales, potential customers.
You want to be able to show them that over the course of time, you’re actually delivering on your promise, and they’re able to connect those dots until something clicks for them, and they say, “You know what? This individual actually promised me this, that, and that, and those are actually things that are happening.” That’s why every couple of weeks, you want to follow-up with something exciting that has happened with your business.
You need to be asking for feedback. Obviously, as they say, you need to take with a grain of salt, the feedback that you get from investors. If you see that there’s a pattern, there are certain things that are being repeated over and over again, perhaps in your story, or around how you’re planning to monetize, how you’re planning to build retention, or whatever that is. If there are concerns that are repeating, that means you need to grab them and implement them into your story so that the next time around, your pitch comes in a more powerful way toward that investor that you’re pitching.
You also need to get more introductions. More cold emails, I’ve got to tell you, are going to land you more meetings. But more meetings don’t equal more money. Remember that we live in a world that is different from 10 to 15 years ago. Ten to 15 years ago, it was very difficult to get in front of people. It was very difficult to understand who could be more inclined to invest in your business and getting in front of them. Now, we live in a world where everything is transparent.
The world is very much connected. There are just a certain amount of degrees of separation between one another. So, the way that you want to go about it is always using the combination of strategy with psychology to get in front of investors. What I mean by this is that once you have your target list of investors that you want to go after, avoid going directly to them. What you would do instead is go to founders of portfolio companies meaning entrepreneurs that have received an investment in the last 6 to 12 months from the investor that you are targeting, and ask them for an introduction.
